Deloitte flags holes in Adani Ports deals, cites need for review

Adani Ports & Special Economic Zone Ltd.’s auditor sounded a note of caution over insufficient disclosures around the company’s transactions with certain entities, returning the spotlight to allegations made by short seller Hindenburg Research on Gautam Adani’s empire.

Deloitte Haskins & Sells LLP raised concerns on Tuesday over the port unit’s transactions with three entities, which the company said were unrelated parties. But the auditor said it couldn’t confirm that the parties were indeed unrelated, and that the firm has refused to get an independent external examination that would help prove so. It therefore signed off on the company’s books only with what’s called a “qualified opinion”.

Noting that “the evaluation performed by the group does not constitute sufficient appropriate audit evidence for the purpose of the audit,” Deloitte said that it can’t comment if the firm was fully compliant with local laws.

It’s the first time that a top auditor has issued a qualified opinion on part of the port-topower conglomerate’s books citing allegations from the US short seller report that has wiped more than $100 billion off the group’s market value. The move will renew concerns that information gaps persist in Adani’s financial dealings, and risks hampering its attempts to move past Hindenburg’s allegations of extensive corporate fraud.

“The qualified statement could be a dampener near term,” Sanford C. Bernstein analysts Nikhil Nigania and Anusha Madireddy wrote in a Tuesday report on the stock.

On a call Tuesday evening with industry analysts, the management of Adani Ports said they had been working with the engineering contractor for a decade. They said it had been delivering projects on time and within cost and that Deloitte decided to qualify it pending the investigation by Sebi and Supreme Court.

Deloitte has also issued a qualified opinion for Adani Transmission Ltd’s financial results for the quarter through March, while auditors of other Adani Group entities — barring Adani Wilmar Ltd. and New Delhi Television Ltd. — issued similar qualified opinions on the respective financial statements, but none have specifically mentioned Hindenburg’s broadside against the conglomerate.

Deloitte is the only Adani Group auditor to raise concerns over the nature of specific transactions as part of its qualified opinion.