According to one of the persons, a formal announcement is expected in the next three-four days. The firm was reappointed statutory auditor last year for a five-year period, according to the company’s annual report for FY22.
A Deloitte Haskins spokesperson said the firm does not comment on client matters. The Adani Group didn’t respond to ET’s queries.
This will be the third change in auditors at Adani companies over the past few months. In May, Shah Dhandharia & Co LLP quit as auditor of Adani Total Gas. It was replaced by Walker Chandiok & Co LLP. The latter firm had earlier taken on the audit role at Adani Energy Solutions as well.
The Adani Group works with a mix of Indian and multinational audit firms.
Shah Dhandharia & Co, based in Ahmedabad, audits the group’s flagship, Adani Enterprises. Adani Wilmar is audited by Ahmedabad-based Dharmesh Parikh & Co, which also audits Adani Green Energy along with SRBC & Co, Ahmedabad.
Key Observations
While Adani Power is audited by SRBC & Co, Adani Energy Solutions and Adani Total are audited by Walker Chandiok, beginning this fiscal year.
The story was first reported by Bloomberg on Friday afternoon.
In a statement uploaded on the stock exchanges on August 8, Deloitte cited matters in the audit review report that were included in the June quarter earnings statement of Adani Ports. First, there was a net balance of Rs 3,871 crore recoverable from a contractor that provided engineering, procurement and construction (EPC) services. The company said it was not a related party. However, the contractor was identified as a related party in the Hindenburg Research report published in January. The net balance with the contractor increased by ₹122 crore on a sequential basis in the June quarter.
“After the Hindenburg episode, we had highlighted that the Adani Group needs to improve transparency on related-party transactions and outreach to the investor community,” said Shriram Subramanian, founder and MD, InGovern, a corporate governance advisory firm.
Subramanian added that it is management’s responsibility to satisfy the auditor and provide comfort to the auditor on the nature and details of related party transactions.
Another point raised by Deloitte related to the sale of an under-construction container terminal in Myanmar to Solar Energy in May 2023. The transaction led to an impairment loss of Rs 1,272 crore as the sales consideration was slashed to Rs 246 crore from a carrying amount of Rs 1,518 crore. Solar Energy is incorporated in Anguilla. The auditor mentioned that the company did not present this as a related-party transaction.
In a press release, the company said that it had sold the Myanmar terminal due to continuous delays in the approval process and challenges in meeting certain conditions, and it had obtained an independent valuation on an “as is, where is” basis.
Based on these observations, the auditor said it was unable to comment whether these transactions may result in possible adjustments in the statement in respect of related parties and whether the company had complied with applicable law and regulations.
In a post-earnings note, Bernstein, a brokerage firm based in the US, highlighted that significant developments for Adani Ports include the Sebi report on the conglomerate, with the Supreme Court having sought its release by August 14.
“Apart from this, the auditor continued to highlight the earlier two qualifications with updates, including increased exposure to a contractor from Rs 3,750 crore in March 2023 to Rs 3,870 crore as of June 2023,” the note added.
In the Adani Ports’ FY23 annual report issued in June, Deloitte flagged some transactions and issued a qualified opinion on the company’s accounts over a lack of disclosure. Deloitte Haskins was earlier the auditor of Adani Energy Solutions and had raised auditor qualifications when the company released its FY23 earnings.
In the last few months, conflicts arising between auditors and companies have been increasing.
Recently, EKI’s board decided to dismiss statutory auditor Walker Chandiok, invoking Section 140 of the Companies Act, 2013. Deloitte resigned from edtech firm Byju’s, citing a delay in the submission of financial statements. SR Batliboi & Co, an EY affiliate, stepped down as the auditor of NYSE-listed Azure Power Global just days before the mandatory July 15 deadline for the company to disclose its financial results for FY22. In June, the auditors of Atlas Jewellery resigned citing concerns related to corporate governance and regulatory compliance.