A tiny, Ahmedabad-based chartered accountancy firm run by a bunch of rookie auditors has resigned as statutory auditor of Adani Total Gas.
The report by US short-seller Hindenburg Research had questioned the appointment of Shah Dhandharia & Co as the independent auditor at group flagship Adani Enterprises and Adani Total Gas. It had argued that the firm lacked the experience to handle such a huge mandate as it had only four partners and 11 employees and operated out of a tiny rented apartment.
“Our resignation does not result from an inability to obtain sufficient appropriate audit evidence,” Shah Dhandharia said in its resignation letter on Tuesday.
“There are no other circumstances connected with our resignation which we consider should be brought to the notice of the board.”
The decision was announced after a board meeting where the directors approved the financial results for the fourth quarter (January-March) as well as the full year ended March 31.
“We have completed our statutory audit (at Adani Total Gas) for the year end March 31, 2023 and issued our reports on 2 May, 2023,” the resignation letter added.
Shah Dhandharia said it had decided to step away “due to increased professional preoccupation in other assignments”.
It will be replaced by Walter Chandiok & Co.
Shah Dhandharia had been appointed as the statutory auditor of both Adani Total Gas and Adani Enterprises for a five-year term at the annual shareholders’ meeting in 2022.
It was not immediately clear whether the chartered accountancy firm would also step down at Adani Enterprises. The board of directors of the group’s flagship is due to meet on Thursday (May 4) to consider its financial results.
The Hindenburg Research report had accused tycoon Gautam Adani and his associates of manipulating stock prices and funnelling funds into the group’s domestic companies through opaque firms based in overseas tax havens.
The report — which came out on January 24 — had caused an earthquake in the stock markets and at one stage wiped out almost $140 billion of the Adani group’s market capitalisation.
The spectacular surge in the valuation of the Adani firms in the past two years had propelled Gautam Adani — believed to be close to Prime Minister Narendra Modi — to the top of global wealth sweepstakes.
The Hindenburg report had questioned the Adani group’s decision to give such a big audit mandate to a virtually unknown firm, overlooking larger and more credible auditors.
The report had claimed that the audit partner who signed off on Adani Gas audits was only 23 years old when he was first appointed.
Hindenburg Research also claimed that the audit partner at Shah Dhandharia who signed off on the audits of Adani Enterprises — the group’s flagship — was only 24 years old when he started. Both are now just 28 years old.
Responding to Hindenburg’s charges, the Adani group had said that all the auditors engaged by the conglomerate were duly certified and qualified by the relevant statutory bodies. It had added that all the appointments were in compliance with applicable laws.
Adani Enterprises had related party transactions with more than 120 group entities in the year ended March 2022 and had 38 subsidiaries, jointly controlled entities and associate firms.
While rebutting the Hindenburg charges on January 29, the Adani group had said it followed a “stated policy of having the global Big Six or regional leaders as statutory auditors”.
The Big Six refers to Arthur Andersen, Coopers & Lybrand, Deloitte and Touche, Ernst & Young, KPMG and Price Waterhouse. They have since telescoped into the Big 4 with the creation of PricewaterhouseCoopers in 1998 following a merger and the collapse of Arthur Andersen in 2002 after the Enron scandal.
Meanwhile, Adani Total Gas reported a 21 per cent rise in consolidated net profits for the fourth quarter ended March 31, 2023.
Net profits rose to Rs 97.91 crore against Rs 81.09 crore in the same period of the previous year. Revenues went up to Rs 1,197.31 crore from Rs 1,185.50 crore in the year-ago period.
“Adani Total Gas Ltd has shown resilience and delivered a good all-round performance both on physical infrastructure and financial front despite high gas prices throughout the year. The fast-track development of steel pipeline and CNG stations has helped in creating natural gas ecosystem in geographical areas where we are present and will now help in connecting PNG consumers going forward,” Suresh P. Manglani, executive director & CEO at ATGL, said.