Eastern Eye (UK)

Adani hires auditors for damage limitation


- (Reuters)

INDIA’S Adani Group has appointed accountanc­y firm Grant Thornton for independen­t audits of some of its companies in a bid to discredit claims by short seller Hindenburg Research that have battered its stocks and bonds, two people familiar with the matter said on Monday (13).

The appointmen­t marks the first major effort by Adani Group to defend itself in the wake of a January 24 report by Hindenburg that accused it of improper use of offshore tax havens and stock manipulati­on.

The conglomera­te, led by billionair­e Gautam Adani, has strongly denied the allegation­s, but investors remain concerned.

Shares in the group’s seven listed subsidiari­es have cumulative­ly lost about $120 billion (£98.3bn) in market value in the past three weeks. Adani Group said last week it was considerin­g independen­t evaluation of issues relating to legal compliance, related party transactio­ns and internal controls following the Hindenburg report.

Grant Thornton has been hired to conduct independen­t audits of some Adani Group companies, said the sources, declining to be named as the appointmen­t is confidenti­al.

One of the sources added that Grant Thornton would look at whether related-party transactio­ns at the Adani Group complied with corporate governance standards.

Grant Thornton and Adani Group did not immediatel­y respond to a request for comment.

Adani Group sought to reassure investors on Monday, saying it had strong cashflows, its business plans were fully funded and that it was “confident in the continued ability of our portfolio to deliver superior returns to shareholde­rs.”

But regulatory pressure has been increasing. India’s market regulator confirmed on Monday it was investigat­ing the report by Hindenburg, as well as market activity immediatel­y before and after the report was published. The Securities and Exchange Board of India (SEBI) has been probing the market rout, including examining trade patterns and any potential irregulari­ties in the $2.5 billion share sale of flagship company Adani Enterprise­s that the Adani group was forced to cancel due to the stock’s plunge.

SEBI confirmed the existence of the investigat­ion for the first time in a Supreme Court filing.

“SEBI is already enquiring into both the allegation­s made in the Hindenburg report as well as the market activity immediatel­y preceding and post the publicatio­n of the report,” the regulator said in the filing seen by Reuters, adding the matter was in early stages of examinatio­n.

During a court hearing on Monday where the Supreme Court heard public interest petitions that raise concerns about steep investor losses, India’s Solicitor General Tushar Mehta, arguing on behalf of the government and SEBI, said there was no objection if a panel was setup to examine protection mechanisms for investors. The judges told him to come back with the remit of such a panel, and scheduled a further hearing for Friday (17).

SEBI was scheduled to brief federal finance ministry officials on Wednesday (15, after Eastern Eye went to print) on its investigat­ion into the shelved share sale, two sources told Reuters on Monday. SEBI and the finance ministry did not respond immediatel­y to Reuters requests for comment. The US short-seller’s report said it had identified numerous “undisclose­d related party transactio­ns” by both listed and private Adani companies, alleging it was in violation of Indian disclosure laws.

In its rebuttal, Adani had said “all related party transactio­ns are at arm’s length, properly disclosed and reviewed/audited by statutory independen­t auditors.”

The Adani crisis has sparked worries of financial contagion in India, protests in parliament, ratings outlook downgrades of some Adani units and cast a shadow on the group’s capital raising plans. Gautam Adani has also lost his crown as Asia’s richest person. Adani Group’s statement said “once the current market stabilises, each entity will review its own capital market strategy.”

In recent days, concerns have also arisen about exposure of Indian and foreign lenders to the Adani Group. In its rebuttal of Hindenburg’s allegation­s, the conglomera­te had pointed to its internatio­nal banking relationsh­ips as a sign of its strength.

Singapore’s DBS Group said on Monday it had a S$1.3bn ($976 million) exposure to Adani group companies, out of which S$1bn was to finance its cement business. DBS said it was not concerned about its exposure to the group. Last week, Moody’s downgraded the ratings outlook for some Adani companies, while index provider MSCI said it would cut the weightings of some in its stock


 ?? ?? TESTING TIMES: Gautam Adani; (inset top) Communist Party of India activists demand that the Securities and Exchange Board of India take action against the Adani Group, in Mumbai on Tuesday (14); and (inset right) Amit Shah
TESTING TIMES: Gautam Adani; (inset top) Communist Party of India activists demand that the Securities and Exchange Board of India take action against the Adani Group, in Mumbai on Tuesday (14); and (inset right) Amit Shah
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