New Delhi: Deloitte Haskins & Sells Saturday resigned as the auditor for Adani Ports and SEZ (APSEZ), one of the listed companies of the Adani Group, citing the lack of a wider audit role within the group as the reason.
However, the resignation has given fresh impetus to the saga between the Adani Group and US-based short-seller Hindenburg Research, especially exacerbated by the fact that there were certain transactions that Deloitte had raised concerns over, which APSEZ did not want to independently look into.
Further complicating the issue was Adani’s own statement saying it was not convinced by Deloitte’s reasons for resigning.
The Congress party was quick to raise the issue, and Hindenburg Research’s founder Nate Anderson too took credit for the development.
These developments come just two days before the 14 August deadline set by the Supreme Court for market regulator Securities and Exchange Board of India (SEBI) to complete its investigation and submit its report on whether Adani group companies had indulged in fraud and corporate misconduct.
As a quick background for context, Hindenburg Research had, in January 2023, published a report alleging corporate misconduct, stock price manipulation, and accounting fraud on the part of the Adani Group.
This led to a war of words between the two entities, a precipitous drop in the stock prices of the Adani Group companies, a Supreme Court-appointed committee investigating the matter, and SEBI coming under increasing pressure to complete its own investigation into the Adani Group.
Also Read: Adani Group market value fell 52% in 6 months up to April, 6.4% drop for India’s top 500 pvt firms
‘Qualified’ clean chit to Adani
In a letter sent to APSEZ Saturday, Deloitte said it was tendering its “resignation as statutory auditors of the Company with immediate effect because we are not statutory auditors of a substantial number of other Adani Group of companies… including an Adani Group company (and its subsidiaries) after completion of our term of five years”.
In other words, Deloitte said it was resigning because it did not have a wider audit role in the Adani Group.
In its final audit report of APSEZ, attached with the resignation letter, Deloitte mentioned certain transactions made by the company that were highlighted by Hindenburg Research as being against SEBI’s rules.
“The Company (APSEZ) did not consider it necessary to have an independent external examination of these allegations because of their evaluation and the ongoing investigation by the Securities and Exchange Board of India as directed by the Hon’ble Supreme Court of India,” Deloitte said in its audit.
It further said that, in the absence of an independent external examination by APSEZ and pending the completion of the investigation by SEBI, the auditor found itself “unable to comment” on whether these transactions were in contravention of SEBI’s rules or not.
Apart from these transactions — which it mentions in a section titled Basis for Qualified Opinion — Deloitte said it could say that APSEZ had complied with the law as regards its accounting practices.
“Except for the possible effects of the matters described in the Basis for Qualified Opinion section above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books,” the audit report said.
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Adani not convinced
In a letter to SEBI Saturday, APSEZ not only said it was not convinced by Deloitte’s reasons for resigning, but also informed the regulator that it had already appointed a replacement auditor—MSKA & Associates, an independent member firm of BDO International.
“In Deloitte’s recent meeting with APSEZ management and its Audit Committee… Deloitte indicated a lack of a wider audit role as auditors of other listed Adani portfolio companies,” APSEZ said in its statement to SEBI.
“The Audit Committee was of the view that the grounds advanced by Deloitte for resignation as Statutory Auditor were not convincing or sufficient to warrant such a move,” it added. “It was also conveyed that it is not within the remit of the APSEZ and its Board to recommend group-wide appointments as other listed Adani portfolio companies are completely independent, with separate boards, executive teams and minority shareholders.”
However, it did add that the decision to end their client-auditor relationship was “amicable”.
Neither Nate Anderson of Hindenburg Research nor the Congress party were convinced.
Congress launches fresh attack
Anderson posted on X, formerly Twitter, Sunday morning with a screenshot from Deloitte’s audit report, with his own comment: “Deloitte just resigned as the statutory auditor of Adani Ports after the company failed to provide “appropriate audit evidence” to address issues raised in the @HindenburgRes report.”
Jairam Ramesh of the Congress party also took to X to post his party’s statement on the matter.
“Shady transactions by the PM’s favourite business group are reportedly leading Deloitte Haskins & Sells to take the unusual step of resigning as auditor for Adani Ports & SEZ,” the statement said. “Adani Ports seems so keen to obscure these apparent related-party transactions that Deloitte is being forced to resign after completing only one of five years as the firm’s statutory auditor.”
When statutory auditors repeatedly quit, you know that things are not as they are projected.
Our statement on the latest developments in the Modani Megascam.
Pradhan Mantri Chuppi Todiye!
जब वैधानिक ऑडिटर अक्सर इस्तीफ़ा देते हैं, तब आप जानते हैं कि चीज़ें वैसी होती नहीं जैसा… pic.twitter.com/DXzEiXeM8P
— Jairam Ramesh (@Jairam_Ramesh) August 12, 2023
“We await SEBI’s report on the Adani MegaScam that is due 14 August 2023,” the statement added. “We expect that the pointed questions raised by the Supreme Court’s Expert Committee will result in a detailed examination of the Adani Group’s murky financials. Like it or not, the truth of Modani’s corruption continues to come out.”
(Edited by Smriti Sinha)
Also Read: Two US regulators probe Adani Group, seek information on disclosures to investors