Adani Group auditor EY faces India accounting regulator inquiry

The National Financial Reporting Authority had in recent weeks started an inquiry into one of the member firms of EY in India, S R Batliboi, sources said. — Reuters

MUMBAI: One of the Adani Group’s longtime auditors is being scrutinised by India’s accounting regulator, according to people familiar with the matter.

The National Financial Reporting Authority (NFRA) had in recent weeks started an inquiry into one of the member firms of EY in India, S R Batliboi, said the people, who asked not to be identified discussing confidential information.

The regulator has requested files and communications related to its audits on some of the companies controlled by billionaire Gautam Adani going as far back as 2014, the people said.

It’s unclear how long NFRA’s inquiry may take or what repercussions, if any, may be faced by the auditor and Adani’s companies. Representatives for NFRA didn’t respond to an emailed request for comment. A representative for EY and S R Batliboi declined to comment.

The scrutiny of S R Batliboi – statutory auditor of five listed Adani companies that produce about half of the group’s revenues – underscored the lingering questions around accounting and disclosures by the sprawling conglomerate that faced a brutal short seller attack in January.

Adani Group, which has forcefully denied Hindenburg’s allegations of corporate malfeasance, is also under a court-mandated probe by India’s markets regulator.

“We strongly reject any suggestion that Adani Group and its businesses have not acted as per the regulations and accounting standards of the jurisdictions in which we operate,” an Adani spokesperson said in a statement.

“The Adani Group has always conducted its business in compliance with all applicable laws and regulations and is confident about its practices, governance and disclosures.”

Besides being the current auditors for Adani Power Ltd, Adani Green Energy Ltd, the consumer goods firm Adani Wilmar Ltd and the two cement makers the tycoon acquired from Holcim Ltd last year, S R Batliboi also signed off on the books of Adani Ports & Special Economic Zone Ltd, the conglomerate’s crown jewel, for a decade leading to 2017.

Indian law prohibits foreign accounting firms from registering as auditors in the country. That’s why Big Four firms including EY operate through independently run affiliates.

Hindenburg raised questions over Adani’s accounting and audits in a January report that erased more than US$150bil in market value at one point from the conglomerate’s listed companies.

The group said in a rebuttal that its firms were audited by “duly certified and qualified” professionals.

But months later, changes followed. Adani Total Gas Ltd on May 2 announced the appointment of Walker Chandiok & Co LLP as its new statutory auditor. It replaced Shah Dhandharia & Co, a longtime auditor of several Adani companies, which Hindenburg said was simply too small to handle such big assignments. — Bloomberg