Pending Sebi reports cited as basis for ‘qualified opinion’
CL Jose
MUMBAI: The auditors of Adani Ports and Special Economic Zone Ltd (APSEZ) have expressed concerns about the company’s financial statements for 2023-24 (FY24) in the wake of the pending outcome of the Securities and Exchange Board of India’s (SEBI) investigation report on the controversial Hindenburg short seller report (SSR).
Though Sebi had submitted reports on 22 investigations, it’s yet to finalise its work on two more probes it has undertaken on the Hindenburg short-selling report (SSR) that rattled the Adani Group last year.
In the meanwhile, APSEZ has reported a 50 per cent surge in its net profit for the twelve months ending March 31, 2024 (FY24) to Rs8,104 crore.
Qualified report is serious
Auditors issuing a ‘qualified report’ on a company’s financial statements for a specified period is viewed seriously by the financial services experts as this amounts to auditors taking a stand that they can’t confidently verify the company’s financial statements or reporting practices.
“As described in the notes to the company’s 2023-24 (FY24) financial statements (Note 9), pending outcome of SEBI investigations, we are unable to comment on the possible consequential effect thereof on any of the periods presented in the Statement, and whether the company has complied with any applicable laws and regulations,” the auditors stated while explaining the ‘Basis for expressing Qualified Opinion’.
Even as two investigation reports are pending from SEBI’s side, the market regulator has raised certain serious charges against Adani Group including non-compliance with provisions on related party transactions under applicable regulations, and has picked holes in disclosures concerning certain financial transactions.
Adani denied charges
However, on the strength of a legal opinion, the company, in its replies to SEBI, denied the charges in its entirety, inter alia, on the basis that the company’s transactions are in full compliance with the prevailing laws and regulations.
While MSKA & Associates are the auditors of the company for the financial year 2023-24, Deloitte Haskins & Sells LLP were the auditors for the group for the previous financial year, 2022-23 (FY23), when the damaging report was published by Hindenburg.
In fact, the erstwhile audit opinion for the year ended March 31, 2023 expressed by the then auditors, Deloitte Haskins & Sells LLP, and also the auditor’s review conclusion for the quarter ended December 31, 2023 (Q3-FY24) by the present auditors, were also ‘qualified’ by the respective auditors for the above matter.
Why Deloitte quit?
It may be relevant to mention here that the earlier auditors Deloitte Haskins & Sells LLP quit the role on August 12, 2023 following differences with the company management (Adani Group) over several transactions.
Though Deloitte had been reappointed by the APSEZ audit committee in July 2022 for a five-year period, they elected to resign in the aftermath of the Hindenburg episode paving the way for MSKA & Associates to take over the job.
The Hindenburg short seller report (SSR) that caught the glare of the public on January 24, 2023, had jolted the markets as it accused the all-powerful, well-diversified Adani Group of stock manipulation and clandestine use of tax havens to hide the stock ownership metrics of Adani family members in the group firms.
The report had also expressed concerns about the unsustainable debt the group has been straddled with, and the allegedly ‘cooked up’ valuations of the group companies.
The release of the Hindenburg report had hammered the prices of the group companies listed on the stock markets creating chaos among the investors, who held Adani group shares in their portfolio.
