'We strongly reject any...': Adani Group reacts as report says its longtime auditor EY faces scrutiny from NFRA

Billionaire Gautam Adani-led Adani Group on Wednesday said it rejects "any suggestion that Adani Group and its businesses have not acted as per the regulations and accounting standards" after a report said its longtime auditor EY is being scrutinised by India's accounting regulator.

The National Financial Reporting Authority, or NFRA, has in recent weeks started an inquiry into S R Batliboi, one of member firms of EY in India, reported Bloomberg quoting sources. 

The regulator requested files and communications related to its audits on some of the companies controlled by Adani going as far back as 2014, the report said. Shares of Adani Group's flagship arm Adani Enterprises Ltd closed trading 2.2% lower on Wednesday at Rs 2,258.05. S R Batliboi currently audits five of Adani's listed firms - Adani Power, Adani Green Energy, Adani Wilmar, and recently acquired cement companies ACC and Ambuja Cements.

“We strongly reject any suggestion that Adani Group and its businesses have not acted as per the regulations and accounting standards of the jurisdictions in which we operate. The Adani Group has always conducted its business in compliance with all applicable laws and regulations and is confident about its practices, governance and disclosures," said a spokesperson for the Adani Group.

In August, Deloitte resigned as the auditor of Adani Ports & Special Economic Zone Ltd, citing concerns over certain transactions flagged in the short-seller Hindenburg's report and after the company declined to undertake an independent inquiry on it.

The billionaire Gautam Adani-led conglomerate later said that Deloitte's reason for quitting as auditor of the company was "not convincing or sufficient to warrant such a move".

The Adani Group has been under siege since allegations of fraud, corruption, stock manipulation and money laundering were levelled by Hindenburg. The US short seller also charged the group with using a vast network of shell companies in opaque financial transactions.

A small Ahmedabad-based chartered accountancy firm, whose appointment was questioned by a US short seller in its scathing report against the conglomerate run by billionaire Gautam Adani, has resigned due to "pre-occupation", Adani Total Gas Ltd said in May. Hindenburg Research in its January 24 report that levelled allegations of fraud, stock manipulation and money laundering against the Adani group, had also raised the issue of the size and capability of the firms auditing the conglomerate.

Hindenburg stated that the independent auditor for the group's flagship firm, Adani Enterprises, and its city gas retailer Adani Total Gas Ltd is a "tiny firm" called Shah Dhandharia.

"Shah Dhandharia seems to have no current website. Historical archives of its website show that it had only 4 partners and 11 employees. Records show it pays Rs 32,000 ($435 in 2021) in monthly office rent. The only other listed entity we found that it audits has a market capitalization of about Rs 64 crore ($7.8 million)," it had stated.

Hindenburg had questioned the Adani Group's decision to give such a big audit mandate to a virtually unknown firm and claimed that the audit partner who signed off on ATGL audits was only 23 years old when he was first appointed.

It also claimed that the audit partner at Shah Dhandharia who signed off on the audits of Adani Enterprises was only 24 years old when he started. Both are now just 28 years old.

Shubham Rohatgi, who signed off the ATGL's audit for the 2022-23 fiscal on May 2, 2023, on behalf of Shah Dhandharia & Co LLP was also red-flagged by proxy advisory firm Institutional Investor Advisory Services (IiAS) in July 2022.

While rebutting the Hindenburg charges, the Adani Group had on January 29 stated that it followed a "stated policy of having the global Big Six or regional leaders as statutory auditors".

With inputs from PTI