New Hindenburg report: What is the link between Sebi, Blackstone, Dhaval Buch and REITs?

New Hindenburg report has raised questions about the SEBI chairperson Madhabi Puri Buch promoting real estate investment trust as a promising asset class.

Hindenburg's new report has raised questions about the SEBI chairperson Madhabi Puri Buch promoting real estate investment trusts as a promising asset class without disclosing that her husband Dhaval Buch is now an adviser to Blackstone Inc, which has sponsored two of the four listed REITs in India.

Hindenburg has raised questions about the SEBI chairperson Madhabi Puri Buchchair promoting real estate investment trusts as a promising asset class without disclosing that her husband Dhaval Buch is now an adviser to Blackstone Inc, which has sponsored two of the four listed REITs in India.(HT Files)

What does the report say about the Blackstone-REITs connection?

The Hindenburg report points out that her husband, Dhaval Buch was appointed as a senior advisor to Blackstone in 2019 despite “never worked for a fund, in real estate or at a capital markets firm”. He was the chief procurement officer at Unilever.

“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, the report said.

Blackstone has been one of the largest investors and sponsors of REITs, a nascent asset class in India, the report said.

During Dhaval Buch’s time as advisor to Blackstone, SEBI has proposed, approved and facilitated major REIT Regulations changes, the report alleges.

These include 7 consultation papers, 3 consolidated updates, 2 new regulatory frameworks and nomination rights for units, specifically benefiting private equity firms like Blackstone, the report alleges.

During industry conferences, Madhabi Buch has touted REITs as her “Favourite Products For The Future” and urged investors to look “Positively” upon the asset class, the report said.

While making those statements, she omitted to mention that Blackstone, who her husband advises, stands to gain significantly from the asset class, the report alleges.

Several regulatory changes have been brought about in the real estate investment trust (REIT) sector since that year.

During this time, Blackstone cashed out its entire stake in Embassy REIT, in December 2023 valued at circa ₹71 billion ($853 million at the time), in India’s largest block trade of the year, per media reports, the Hindenburg report alleges.

An email has ben sent to Blackstone.

On the Hindenburg report's concerns surrounding Dhaval's association with Blackstone, the Buch couple said in a statement on August 11 that the appointment was on account of his deep expertise in supply chain management and predates Madhabi's elevation of becoming the Sebi chairperson.

"At no time has Dhaval been associated with the real estate side of Blackstone," they added.

They also clarified that immediately on Dhaval's appointment, the Blackstone Group was added to Madhabi's "recusal list" maintained with Sebi.

Making it clear that all the regulations in Sebi are approved by its board and not by the chairperson, the statement said insinuations of a handful of the decisions concerning the Real Estate Investments Trusts industry are favours to specific party are "malicious and motivated".

What is a REIT?

REITs are investment vehicles that own, operate and manage a portfolio of income-generating property for regular returns. REIT-able properties in India include commercial assets ― primarily office spaces ― that can generate steady rental income.

They operate like mutual fund units or shares. REITs have to be listed on the exchanges and traded like securities. Small investors can buy units of REITs from both the primary and secondary markets, just as they buy shares or mutual fund units.

India’s first REIT, Embassy, was sponsored by Blackstone and received SEBI approval in April 2019, Hindenburg report said.

Blackstone has so far sponsored the Mindspace REIT, the country’s second publicly traded REIT in August 2020, and Nexus Select Trust, which listed in May 2023, the report said.

In December 2023, Global investment firm Blackstone sold its entire 23.5 per cent stake in Embassy Office Parks REIT for around ₹7,100 crore, according to sources.