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Deloitte Haskins & Sells LLP, the auditor for billionaire Gautam Adani's ports business, is reportedly planning to leave, according to persons familiar with the situation, in a move that could have far-reaching ramifications for the Adani Group. This possible move comes amid increased scrutiny of the Indian company by short-seller Hindenburg Research, which has accused it of accounting fraud and market manipulation.
Mahua Moitra, a prominent member of the Trinamool Congress, commented on the reports on social media, saying, "Now we're waiting for ED, CBI, SFIO to raid Deloitte!" How can they refuse to audit the government's most shady group? On a more serious note, investors should exercise caution." She posted a Bloomberg news piece highlighting Deloitte's letter to Adani Ports & Special Economic Zone Ltd about its resignation plans.
According to Bloomberg, the formal announcement of Deloitte's departure is likely in the following days. This development could intensify existing suspicions about the Adani Group's accounting practices. Deloitte's past reservations about transactions between Adani Ports and certain entities have been key to the continuing investigation.
Earlier this year, the global accounting firm's Indian office voiced concerns about transactions involving Adani Ports and three unconnected firms. Deloitte was criticized at the time for failing to verify Adani's claims and ensure complete compliance with local legislation. It was stressed by the auditor that no independent external examination had been conducted to confirm the statements.
This impending resignation brings renewed attention to the Adani business empire's governance structure, as it comes just days before the Securities and Exchange Board of India (SEBI) is set to release the findings of its investigation into Hindenburg Research's allegations of accounting fraud and market manipulation. Notably, Gautam Adani has always denied any misconduct, and a Supreme Court-appointed expert team earlier found no evidence of regulatory failure or stock price manipulation.
Hindenburg Research had already accused the Adani Group of fraud, stock manipulation, and money laundering in an earlier study dated January 24. Inadequate disclosures of related party transactions were also highlighted in the report. According to Deloitte's statement, the Adani Group did not consider an independent external assessment necessary due to ongoing internal evaluations and the SEBI probe.
Deloitte emphasized that the Adani Group's ratings were insufficient to serve as trustworthy audit evidence, emphasizing the situation's complexities. The interim report from the Supreme Court-appointed expert group earlier this year found no evidence of price manipulation or regulatory violations in the Adani Group's equities.
Purchase contracts involving engineering, procurement, and construction (PEC) with a subsidiary of a party referenced in the Hindenburg report were among the transactions flagged by Deloitte. The current developments highlight the rising challenges to the Adani Group's reputation and raise concerns about the conglomerate's larger corporate governance landscape.
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