Deloitte has chosen to step down from its role as the auditor of India’s Adani Ports, citing concerns raised by a report from Hindenburg. The report had highlighted specific transactions that Deloitte had flagged in May, leading to a qualified opinion—a signal of auditor concern.
The move by Deloitte raises questions about Adani Group’s financial practices, as the conglomerate had been under scrutiny since January due to allegations made by Hindenburg, including questionable use of tax havens, complex related-party transactions, and high debt levels, all of which Adani Group has denied.
The fallout from Hindenburg’s report had resulted in a significant decline in Adani Group’s stock value, losing around $150 billion. However, the group managed to regain some of the lost ground by addressing its debt situation and restoring investor confidence.
Deloitte’s decision to resign stemmed from its request for Adani Ports to initiate an independent investigation into the flagged related-party transactions, as highlighted by Hindenburg. However, Adani Ports declined to pursue such an inquiry, leading to Deloitte’s resignation.
The departure of Deloitte as auditor further casts a cloud over Adani Group’s financial management. This development is particularly noteworthy as Deloitte had suggested that Adani Ports conduct an independent review of the transactions in question, a step that Adani Ports opted not to take. Deloitte and Adani Ports have refrained from providing immediate comments on this matter in response to requests from Reuters.
Deloitte’s withdrawal as Adani Ports’ auditor is anticipated to be effective as soon as the upcoming Monday. The move highlights the increasing scrutiny on Adani Group’s financial practices and governance standards.
The report published in May had prompted the involvement of a court-appointed panel to investigate the allegations against Adani Group. However, this inquiry has thus far yielded no significant findings, leading to questions about the regulatory body’s effectiveness in addressing the matter.
In response to the allegations made by Hindenburg, Gautam Adani, the Chairman of Adani Group, dismissed the report as a baseless attempt to tarnish the conglomerate’s reputation. He expressed confidence in the group’s governance and transparency standards, particularly as the court-appointed panel did not identify any lapses.
Following Deloitte’s resignation, the audit committee of Adani Port and Special Economic Zone (APSEZ) has chosen MSKA & Associates as the new auditor for the company. MSKA & Associates is an independent member of BDO International, one of the top six global audit firms.
GK Pillai, the Chairman of the Audit Committee of APSEZ, stated in a released statement that the reasons provided by Deloitte for their resignation were insufficient and unconvincing. Deloitte had mentioned in a recent meeting with the company’s management that their decision was influenced by their desire for a broader audit role, encompassing other listed Adani portfolio companies. However, the audit committee clarified that it is beyond APSEZ’s scope to recommend appointments for the entire Adani Group, as these companies operate independently, with separate boards, executive teams, and minority shareholders.
In light of this clarification, Deloitte chose not to continue as the statutory auditor for APSEZ. Both parties agreed to amicably terminate their contractual relationship.
Adani Group clarified that it had provided all necessary information to Deloitte, a fact confirmed by Deloitte in its resignation letter dated August 12, 2023. Deloitte had been serving as the statutory auditor for APSEZ since May 2017 and had been reappointed for another five-year term in July 2022.
In its official resignation letter, Deloitte indicated that it was stepping down due to not being the auditor for a significant number of Adani Group companies. This departure raises questions about the broader financial oversight and governance practices within the Adani Group, as it grapples with allegations of impropriety.
