The Adani Group on Friday said that Hindenburg Research's investigation into accounting or fraud type assertions is devoid of facts as eight out of nine public listed entities of the conglomerate are audited by "one of the Big 6."
While Adani Ports & SEZ and Adani Transmission have Deloitte Haskins & Sells as their statutory auditor, Adani Power is audited by accounting firm SRBC & Co. Adani Green Energy counts SRBC & Co. (EY) & Dharmesh Parikh & Co. as joint auditors, the ports-to-power conglomerate says in a presentation.
However, Adani Enterprises, which kicked off its follow-on public offer (FPO) on Friday, and Adani Total Gas are audited by Shah Dhandharia & Co.
In its 106-page report, short seller Hindenburg Research had said that the independent auditor for Adani Enterprises and Adani Total Gas is "a tiny firm called Shah Dhandharia."
"The audit partners at Shah Dhandharia who respectively signed off on Adani Enterprises and Adani Total Gas' annual audits were as young as 24 and 23 years old when they began approving the audits. They were essentially fresh out of school, hardly in a position to scrutinize and hold to account the financials of some of the largest companies in the country, run by one of its most powerful individuals," the U.S.-based short seller claimed.
"Shah Dhandharia hardly seems capable of complex audit work. Adani Enterprises alone has 156 subsidiaries and many more joint ventures and affiliates, for example. Further, Adani's 7 key listed entities collectively have 578 subsidiaries and have engaged in a total of 6,025 separate related-party transactions in fiscal year 2022 alone, per BSE disclosures," the report alleged.
Responding to these allegations, the Adani Group said that there are more than 27 statutory audit firms which audit the various entities within Adani Enterprises, which include a mix of big four statutory auditors.
Adani Enterprises acts as an incubator and has businesses in various sectors and subsidiaries and associates spread over eight jurisdictions, the Gautam Adani-led conglomerate says.
On the concerns about the group's "high leverage", the conglomerate says more than 100 of its various companies are rated by three global and seven domestic rating agencies. "Overall promoter leverage is less than 4% of promoter holding," it adds.
On revenue or balance sheet being artificially inflated or managed, the Adani Group says that out of nine listed companies in Adani portfolio, six are subject to specific sector regulatory review for revenue, costs and capex.
"Hindenburg asked 89 question in Total, the following Question by number: 1,2,3 5,6,7 19,20,21, 27,28,29 62,63,64 and 72,74,75,77,78,79 are in relation to Related party transactions, DRI (Directorate of Revenue Intelligence) and court cases," the presentation notes.
"21 in total cannot be claimed to be result of any investigation over a 2 year period or any such assertion as they were disclosed in the following public documents all the way back from 2015 onwards," it adds.
Meanwhile, the selloff in Adani Group stocks continued for the second straight session. Shares of Adani Transmission crashed as much as 20% to ₹2,024 on the National Stock Exchange (NSE). Shares of Adani’s green energy arm, Adani Green Energy, dropped 20% to ₹1,501 apiece on the NSE.
Ambuja Cements, which the Adani Group acquired from Holcim last year, saw its share price fall as much as 15% to ₹391 apiece on the NSE. Adani Ports and Special Economic Zone dropped as much as 15% to ₹609 apiece on the NSE. Shares of Adani Enterprises fell as much as 10% to ₹3,050.
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