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Deloitte has resigned as the auditor of Indian tycoon Gautam Adani’s logistics unit, in a fresh blow for the billionaire’s business empire as it works to restore investor confidence after a short-seller attack.
The auditor resigned at the weekend citing concerns it could not thoroughly scrutinise transactions between companies in the group and the logistics unit, India’s biggest commercial ports operator and one of Adani’s most profitable businesses.
Related party transactions were at the heart of a report by New York-based short-seller Hindenburg Research into the Adani Group released this January, which wiped billions from the market cap of the conglomerate’s listed companies.
Hindenburg accused the Indian infrastructure group of using an offshore shell network to manipulate earnings and “avoid a material writedown and negative impact to net income”. Adani denies all the allegations.
Deloitte had served as auditor for Adani Ports and Special Economic Zone (Apsez) since 2017. But in May the auditor raised doubts over transactions with “related parties” and Adani’s refusal to have an “independent external examination” of the short-seller’s allegations.
A memo written by an external law firm for Adani did “not constitute sufficient appropriate audit evidence”, said Deloitte in its qualified opinion of the group’s results.
Apsez did not consider it appropriate to have an external evaluation while the Securities and Exchange Board of India (Sebi), the country’s securities regulator, was conducting its own probe into the short-seller’s allegations, Adani told Deloitte. Sebi is due to report to India’s Supreme Court on the results of its investigation on Monday.
Apsez audit committee chair Gopal Krishna Pillai, a former special secretary in the commerce ministry of India, said the committee disagreed with Deloitte’s argument.
“[The] grounds advanced by Deloitte for resignation . . . were not convincing or sufficient to warrant such a move,” said Pillai.
Pillai said the issues Deloitte flagged in its resignation letter “are adequately disclosed and addressed [by Adani]”, adding that Apsez has appointed MSKA & Associates, a member of international accountancy group BDO, as the company’s new auditor.
Apsez and Deloitte did not immediately respond to a request for comment.
Adani’s listed companies have recovered some of their collective $150bn stock market loss after Hindenburg’s report, boosted by investments from Florida-based GQG Partners, but are still trading below pre-January levels.
This is Deloitte’s second high profile audit resignation in the past three months in India. In June, Deloitte quit as auditor to Byju’s, the education technology company, accusing it of failing to provide financial documents.