The auditor to Adani Ports & Special Economic Zone (APSEZ) has issued a ‘qualified opinion’ on the financial results published by the company in the absence of an ‘independent external examination’ of certain allegations made in the Hindenburg report.
The auditor Deloitte Haskins & Sells LLP flagged a recent transaction leading to sale of an under construction container terminal in Myanmar to a company incorporated in Anguilla, an island in the Caribbean, which is a British Overseas Territory. APSEZ posted an impairment loss of Rs 1,558.16 crore on account of the sale.
APSEZ represented that the buyer Solar Energy Ltd is not a related party.
The auditor’s report refers to engineering, procurement and construction (EPC) contracts with a fellow subsidiary contractor of a party identified in the allegations made in the short seller report (Hindenburg Report).
Deloitte noted that a net balance of Rs 2,457.05 crore is recoverable from the contractor, of which Rs 713.63 crore relate to security deposits paid to the contractor and Rs 1,501.50 crore in respect of capital advances.
It also notes that security deposits carry an interest of 8 per cent and security deposits totalling Rs 713.63 crore have been given prior to April 1, 2022. Additionally, deposits worth Rs 253.63 crore relate to projects which have not commenced as of March 31, 2023.
The auditor, which did not name the contractor, informed that APSEZ has represented that the contractor is not a related party.
“The company has represented to us that there is no effect of the allegations made in the short seller report on the statement based on their evaluation and after consideration of a memorandum prepared by an external law firm on the responses to the allegations in the short seller report,” the auditor wrote.
The company did not consider it necessary to have an independent external examination of these allegations because of their evaluation and the ongoing investigation by Sebi as directed by the Supreme Court, it added.
The evaluation performed by the company, as stated in note 11 to the statement, does not constitute sufficient appropriate audit evidence for the purpose of the audit, Deloitte wrote.
“In the absence of an independent external examination by the company and pending completion of investigation, including matters referred to in the report of the expert committee constituted by the SC, as described in note 11 to the statement, by the Sebi of these allegations, and in respect of the sale of assets described in the immediately preceding paragraph, we are unable to comment whether these transactions or any other transactions may result in possible adjustments and/or disclosures in the statement in respect of related parties and whether the company should have complied with the applicable laws and regulations,” the report said.
The company defended itself saying it has been working with the contractors for over a decade and it has successfully delivered projects without defaults and with highest operating credentials. APSEZ also obtained an opinion from a reputed law firm that the contractor is an unrelated party.
“The Audit Committee of the Company as well as the Company are of the view that an independent examination at this stage will not be appropriate given the ongoing investigations by SEBI and the Expert Committee appointed by the Hon’ble Supreme Court. Deloitte’s qualification this year, as we summarize it, is owing to the pending conclusion of these investigations," - Adani Spokesperson.
Referring to the sale of the Myanmar project, it said that APSEZ had explored other potential buyers which did not fructify.