Deloitte raises concerns over Adani Ports transactions: Report

Deloitte Haskins & Sells LLP, a top auditor, has raised concerns regarding the port unit's transactions with three entities in the Adani Group, which the company claims are unrelated parties. However, Deloitte has stated that it cannot confirm the independence of these parties as the company has refused to undergo an independent external examination to verify their claims. The auditor has issued a qualified opinion, stating that the evaluation performed by the group does not provide sufficient audit evidence and therefore they cannot determine if the company is fully compliant with local laws.

This development marks the first time that a top auditor has issued a qualified opinion on a portion of the Adani Group's financial statements. It raises concerns about potential information gaps in the conglomerate's financial dealings, particularly in its port-to-power businesses.

Last year, a Fitch Group unit reported that the Adani Group was heavily leveraged and pursuing aggressive expansion across various businesses, primarily funded through debt. This expansion has strained the group's credit metrics and cash flow, leading to concerns that it may face a debt trap or even default.

The Adani Group has denied allegations of stock manipulation and accounting fraud made by Hindenburg, and it is currently awaiting the findings of an investigation by India's market regulator, the Securities and Exchange Board of India (SEBI). The Supreme Court has granted SEBI a three-month extension to complete its probe into Hindenburg's allegations and has requested an updated status report by August 14.

Deloitte discovered that the Adani Group had signed an engineering contract with a subsidiary of a company mentioned in the Hindenburg report, from whom they were owed 37.5 billion rupees ($453 million) as of March 31. The group claimed that this contractor was not a related party.

There were also financial transactions, including equity dealings, with parties identified in the short seller report. The Adani Group informed Deloitte that these parties were not related, and all outstanding payables had been settled.

Recently, Adani Ports sold its Myanmar port to Solar Energy Ltd., incorporated in Anguilla. The sale price was revised significantly downward, and an impairment charge was taken. The group informed the auditor that these parties involved in the transaction were not related parties.