Deloitte flags Adani Port transactions citing 'insufficient disclosures'

It's the first time that a top auditor has issued a qualified opinion on part of the empire's books citing allegations from the US short seller report that has wiped more than $100 bn off the group

By Advait Palepu

Adani Ports & Special Economic Zone Ltd.’s auditor said insufficient disclosures over certain transactions means it can only issue a qualified opinion on the company’s accounts, returning the spotlight to allegations made by short seller Hindenburg Research on Gautam Adani’s empire.

Deloitte Haskins & Sells LLP raised concerns on Tuesday over the port unit’s transactions with three entities, which the company said were unrelated parties. But the auditor said it could not confirm that the parties were indeed unrelated, and that the firm has refused to get an independent external examination that would help prove so.

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.

It’s the first time that a top auditor has issued a qualified opinion on part of the empire’s books citing allegations from the US short seller report that has wiped more than $100 billion off the group’s market value. The move will renew concerns that information gaps persist in the port-to-power conglomerate’s financial dealings, and risks hampering its attempts to move past Hindenburg’s allegations of extensive corporate fraud.

The Adani Group has denied Hindenburg’s allegations. It is awaiting findings of a probe by India’s market regulator that needs to conclude by Aug. 14 deadline on any possible violations by the conglomerate. An expert panel appointed by India’s top court this month found no regulatory failure or signs of price manipulation in the Adani Group stocks in its interim report.

Here 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.