The auditor of Adani Ports & Special Economic Zone Ltd has said that insufficient disclosures over certain transactions means it can only issue a qualified opinion on the company's accounts, said a media report. This has returned the spotlight to allegations made by short seller Hindenburg Research that has wiped more than $100 billion off the group’s market value.
On Tuesday, Deloitte Haskins & Sells LLP raised concerns over the port unit's transactions with three entities, which as per the company were unrelated parties. The auditor stated that it could not confirm whether the parties were indeed unrelated, and that the firm has refused to get an independent external examination that would help prove so, reported Bloomberg.
Noting that “the evaluation performed by the group does not constitute sufficient appropriate audit evidence for the purpose of the audit,” Deloitte said that it therefore cannot comment if the company was fully compliant with local laws, the report added further.
This is the first time that a top auditor has issued a qualified opinion on part of the empire's books and the move is expected to renew concerns that information gaps persist in the port-to-power conglomerate's financial dealings.
“The Audit Committee of the Company as well as the Company are of the view that an independent examination at this stage will not be appropriate given the ongoing investigations by SEBI and the Expert Committee appointed by theSupreme Court. Deloitte’s qualification this year, as we summarise it, is owing to the pending conclusion of these investigations," said Adani Ports in a stock exchange filing.
Last year, a Fitch Group unit said in a report that Gautam Adani's ports-to-power conglomerate is "deeply overleveraged", with the group investing aggressively across existing as well as new businesses, predominantly funded with debt.
The aggressive expansion pursued by the Adani Group, led by Asia’s richest person, has put pressure on its credit metrics and cash flow, CreditSights said in the report, adding that “in the worst-case scenario" it may spiral into a debt trap and possibly a default.
It must be noted that the Adani Group has denied Hindenburg's allegations of "brazen" stock manipulation and accounting fraud, and is awaiting the findings of a probe by India’s market regulator Securities and Exchange Board of India (Sebi). The Supreme Court earlier granted Sebi three months extension to complete its probe into Hindenburg’s allegations against the Adani Group. The bench also asked the capital markets regulator to give an updated status report by August 14.
Following are the three transactions flagged by Deloitte:
Adani Group signed an engineering contract with a subsidiary of a company identified in the Hindenburg report from whom 37.5 billion rupees ($453 million) was recoverable as of March 31. The auditor was told by the group that this contractor is not a related party.
There have been financial transactions, including of equity, made with parties identified in the short seller report. Adani Group told Deloitte that these are not related parties. All payables were settled with no dues remaining.
Adani Ports’ sale of its Myanmar port to Solar Energy Ltd., incorporated in Anguilla, earlier this month. The sale price was revised from 20.15 billion rupees to just 2.47 billion rupees and an impairment charge was taken. The group told the auditor these are not related parties.
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