Adani Ports shares fall 3% after Deloitte resigns as auditor

Shares of Adani Ports and Special Economic Zone (APSEZ) slipped over 3% in opening trade on Monday after the Adani Group company officially announced that Deloitte Haskins & Sells LLP has resigned as auditor of the company. The board of directors of APSEZ has appointed MSKA & Associates, an independent member firm of BDO International, as the statutory auditors of the company, subject to the shareholders’ approval. The development came days after the billionaire Gautam Adani-led company released its June quarter earnings report.

Meanwhile, the stock, along with other listed group entities, remained in focus as Securities and Exchange Board of India (SEBI) is expected to submit the results of a probe into the market allegations against the Adani group of companies before the nation’s Supreme Court today.

Early today, APSEZ shares opened 2.2% lower at ₹783 against the previous closing price of ₹800.65 on the BSE. Extending opening losses, the largecap stock declined as much as 3.45% to ₹772.95, while the market capitalisation dipped to ₹1.69 lakh crore.

On August 12, Adani Ports informed the exchanges that its board of directors, based on the recommendation of the audit committee, accepted the resignation of Deloitte Haskins & Sells LLP, who tendered their resignation from the position of statutory auditors of the company and its material subsidiaries.

As per report, Deloitte had raised concerns over transactions between Adani Ports and three entities that Adani said were unrelated parties. It is notable that Adani Group came under heavy scrutiny following short seller Hindenburg Research's report released on January 24, accusing the conglomerate of “stock manipulation and accounting fraud”.

Adani Ports appointed Deloitte as statutory auditor in May 2017, which was extended further by another term of five years in July 2022. In Deloitte’s recent meeting with APSEZ management and its Audit Committee, which, by policy, is comprised of and chaired by independent directors only (G. K. Pillai, G. Raghuram, P. S. Jayakumar and Nirupama Rao), Deloitte indicated a lack of a wider audit role as auditors of other listed Adani portfolio companies, Adani Ports said in the Exchange filing.

The release further said, “The audit committee was of the view that the grounds advanced by Deloitte for resignation as statutory auditor were not convincing or sufficient to warrant such a move. It was also conveyed that it is not within the remit of the APSEZ and its board to recommend group-wide appointments as other listed Adani portfolio companies are completely independent, with separate boards, executive teams and minority shareholders. Following this, Deloitte was not willing to continue as APSEZ’s statutory auditor and, therefore, it was agreed to amicably end the client-auditor contractual relationship between APSEZ and Deloitte.”

G. K. Pillai, Chairman of Audit Committee of Adani Ports, said, “It is important to mention that, in response to a query by the Audit Committee, Deloitte confirmed that they have received all the APSEZ information from the management of the Company. The same has been confirmed by Deloitte in their resignation letter dated August 12, 2023 to the Company.”

“The ’Other Matters’ highlighted in the auditor’s resignation are adequately disclosed and addressed in our FY23 financial statements. We are fully confident that these matters will be appropriately resolved in our September ‘23 filing,” he added.

Last week, Adani Ports released its June quarter earnings report, delivering its strongest-ever quarterly operating performance. It reported an 80% jump in its net profit at ₹2,119 crore in Q1FY24 compared to ₹1,177 crore in the corresponding period last year on the back of the highest-ever quarterly port cargo volumes. The revenue from operations increased 24% year-on-year ₹6,248 crore from ₹5,058 crore in the year-ago period. In terms of EBITDA, the company recorded an 80% rise in earnings as compared to EBITDA worth ₹2,089 crore in the year-ago period.

The overall cargo volume during the first quarter of fiscal year 2023-24 grew 12% to 101.4 MMT, supported by container growth of 15%, as compared to 90.9 MMT in the same period last year. APSEZ’s domestic cargo volumes recorded an 8% year-on-year increase, more than the country's cargo volume growth rate.

In its guidance for FY24, APSEZ says cargo volumes can be expected at 370-390 MMT, resulting in revenue of ₹24,000-25,000 crore and EBITDA of ₹14,500-15,000 crore. "Total capex during the year is expected to be ₹4,000-4,500 crore."

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