As the Indian tycoon Gautam Adani’s corporate empire attempts to regain investor confidence following a short-seller onslaught, Deloitte has resigned as the auditor of the company’s logistics division.
The auditor resigned over the weekend, expressing concerns that it couldn’t adequately examine transactions between group firms and the logistics company, which operates one of Adani’s most lucrative operations and is India’s largest commercial port.
Avoid a material write-down
Related party transactions were at the center of a report on the Adani Group published in January by the New York-based short-seller Hindenburg Research, which caused the market value of the conglomerate’s listed companies to plummet by billions.
Hindenburg claimed that the Indian infrastructure company manipulated earnings in order to “avoid a material write-down and negative impact to net income” by employing an offshore shell network. Adani disputes each and every charge.
Since 2017, Deloitte has been the company’s auditor for Adani Ports and Special Economic Zone (Apsez). However, the auditor expressed skepticism in May regarding “related party” transactions and Adani’s opposition to an “independent external examination” of the claims made by the short seller.
In their qualified assessment of the group’s outcomes, Deloitte stated that a letter created by an outside law firm for Adani Ports “did not constitute sufficient appropriate audit evidence.”
Sebi is scheduled to present the findings of its inquiry
According to Adani, Apsez did not believe it was appropriate to perform an external assessment while the Securities and Exchange Board of India (Sebi), the nation’s securities regulator, was looking into the charges made by the short-seller. On Monday, Sebi is scheduled to present the findings of its inquiry to the Supreme Court of India.
Gopal Krishna Pillai, the chair of the Apsez audit committee and a former special secretary in the Indian Ministry of Commerce, stated that the committee did not concur with Deloitte’s position.
“[The] grounds advanced by Deloitte for resignation… were not convincing or sufficient to warrant such a move,” declared Pillai.
The problems raised by Deloitte in its letter of resignation, according to Pillai, “are adequately disclosed and addressed [by Adani Ports],” and Apsez has chosen MSKA & Associates, a subsidiary of the global accounting firm BDO, to serve as the new auditor for the business.
Requests for comments from Apsez and Deloitte were not immediately entertained.
With help from investments from Florida-based GQG Partners, Adani’s listed companies have partially recovered from their combined $150 billion stock market loss following the Hindenburg report, although they are still trading below pre-January levels.
In the last three months, India has seen two high-profile audit resignations from Deloitte. Byju’s, a provider of educational technology, was fired by Deloitte in June after it was charged with failing to disclose financial records.
