Will US Govt Act Against Blackstone Based On Hindenburg Report?

In the Adani Saga, Hindenburg Research has cast doubts on Blackstone, one of the USA's largest fund management companies for using unscrupulous means to profit from India. In its latest report, Hindenburg has alleged that Blackstone may have used the husband of Sebi's chief to benefit from regulations and cash out with Rs 71 billion. The strict US Foreign Corrupt Practices Act (FCPA) prohibits US companies from indulging in corruption or bribery in foreign countries. The question now is whether the US government will act against the allegations of Hindenburg against Blackstone? In her defence, the Sebi chief has said that her husband's appointment at Blackstone predates her appointment at Sebi and she had recused herself from Blackstone-related matters.

Hindenburg says that Since Madhabi Buch became Chairperson in March 2022, Sebi has proposed and implemented a raft of REIT (Real-estate Investment Trusts) legislation, of significant benefit to Blackstone as one of the largest REIT sponsors in India, whom the Sebi chief's husband works for. During her tenure, Hindenburg says, Blackstone cashed out its entire stake in Embassy REIT, in December 2023 valued at Rs 71 billion (USD 853 million at the time), in India’s largest block trade of the year.

According to Hindenburg, Blackstone sponsored several major REITs in India during the tenure of Dhaval Buch (husband of Sebi chief Madhabi Puri Buch) as Senior Advisor at Blackstone and while his wife was a Sebi official. Hindenburg says Blackstone sponsored several including Embassy (India’s first REIT), Mindspace (India’s second), and Nexus Select Trust (India’s fourth).

During Madhabi Buch’s tenure as a Whole Time Member at Sebi, her husband was appointed as a senior advisor to Blackstone in 2019, which Hindenburg has flagged saying Buch had not worked for a fund before in real estate or capital markets, per his LinkedIn profile. During Dhaval Buch’s time as an advisor to Blackstone, Sebi proposed, approved and facilitated major REIT regulatory changes, Hindenburg says. These include 7 consultation papers, 3 consolidated updates, 2 new regulatory frameworks and nomination rights for units, specifically benefiting private equity firms like Blackstone, says the report.

Hindenburg goes on to add that Blackstone has been one of the largest investors and sponsors of REITS, A Nascent Asset Class In India and during Dhaval Buch’s time as senior advisor, while his wife was a Sebi official, Blackstone sponsored Mindspace and Nexus Select Trust, India’s Second and Fourth REIT To Receive Sebi Approval To Publicly IPO, the report says.

India’s first-ever REIT, Embassy, obtained Sebi approval and IPO’ed on 1 April 2019, sponsored by Blackstone, just 3 months before Dhaval Buch reported joining Blackstone in July 2019. 13 months later, in August 2020, Mindspace REIT, backed by Blackstone, became India’s second REIT to IPO, after Sebi approval. Blackstone now sponsors Nexus Select Trust, described as India’s largest retail platform of assets, by ICICI Research, which was listed in May 2023 and became India’s fourth publicly traded REIT. Blackstone has multiple other interests across the retail estate.

"Dhaval Buch, the husband of Sebi Chairperson Madhabi Buch, describes himself as having deep experience in procurement and all aspects of the supply chain, per his LinkedIn. He spent most of his time at consumer company Unilever, rising to become Chief Procurement Officer, according to his LinkedIn The same source shows that over the past two decades, he had never worked for a fund, in real estate or at a capital markets firm. Despite the lack of experience in these areas, he joined Blackstone, a global private equity firm and large investor in India, as a Senior Advisor in July 2019, per his Linkedin," Hindenburg said.

As Per Hindenburg, How Sebi Chief Promoted REITs
During Industry Conferences, Sebi Chairperson Madhabi Buch has touted REITs as her “Favourite Products For The Future” and urged investors to look “Positively” upon the asset class. While making those statements, she omitted to mention that Blackstone, who her husband advises, stands to gain significantly from the asset class.

"Perhaps the biggest champion of REITs in India is Sebi Chairperson Madhabi Buch, who has promoted the asset class at various conferences. On 20 March 2023, she said REITs are among her “favourite products for the future” at a News18 Rising Bharat Summit.

Sebi Chief's Response
Dhaval’s appointment, in 2019, as Senior Advisor to Blackstone Private Equity was on account of his deep expertise in Supply Chain management. Thus his appointment pre-dates Madhabi’s appointment as Sebi Chairperson. This appointment has been in the public domain ever since. At no time has Dhaval been associated with the Real Estate side of Blackstone. On his appointment, the Blackstone Group was immediately added to Madhabi’s recusal list maintained with Sebi.

Palak Shah

BW Reporters The writer is author of the book: The Market Mafia - Chronicle of India’s High-Tech Stock Market Scandal & The Cabal That Went Scot-Free. Palak has been a journalist in Mumbai for nearly two decades now. He has worked for most premier pink papers including The Economic Times, Business Standard and The Financial Express and The Hindu Business Line. He was drawn to crime reporting at the age of 19 but a few years in the field told him that the fabric of crime had changed and the organised gangs, as Mumbai had witnessed during the eighties, no longer existed. It was business and markets that dominated the scenario. His passion to unravel the intricacies of the ‘white money’ economy led Palak to the world of finance and regulations.