Adani Enterprises (AEL) on Friday called the “accounting investigation” by US-based Hinderburg Research ‘devoid of facts’. The detailed statement to the stock exchange comes against the backdrop of Adani Group stocks taking a significant knock on the last two trading sessions, and losing over Rs 4 trillion in market capitalisation.
The group in the statement said that out of the group’s nine listed companies, eight are audited by one of the big-six auditing firms. For example: Adani Ports & SEZ and Adani Transmission are audited by Deloitte Haskins & Sells and Adani Power and Adani Green Energy by SRBC & Co. (EY).
The company added that it acts as an incubator and has businesses in various sectors and subsidiaries and associates spread over eight jurisdictions. “There are more than 27 statutory audit firms which audit various entities within Adani Enterprises. These include a mix of big-four statutory auditors as well as statutory auditors who are highly reputed in their respective jurisdictions,” said the statement.
For example, Adani Airports subsidiary, MIAL (Mumbai International Airport) is audited by Grant Thornton, while the other six airports are audited as per Airport Authority of India panel provisions in the concession agreement by the audit firm, Gayendra & Co.
The group said it is evaluating one of the six global audit firms for Adani Total Gas too. It also said the 21 questions on related-party transactions by Hindenburg and reference to court cases come from the group companies’ public disclosures from 2015 onwards.
The Adani group reaction comes at a time when Hindenburg Research’s report released a day before saw its `20,000-crore follow-on public offer (FPO) getting just 1% subscription on first day. The FPO opened on Friday and closes on January 31.
On the allegations of leverage or over-leverage of group companies, AEL said 100 of its various companies are rated by top rating firms, including Moody’s, and these account for nearly 100% of its EBITDA (earnings before interest, tax, depreciation and amortisation.
In addition, it said that the allegation of revenue or balance sheet inflation, six of the nine listed firms are subjected to specific sector regulatory reviews for revenue, costs and capital expenditure. Further, it is consistently filing reports for market regulators like Sebi, BSE and NSE.
In these cases, revenue, claimed expenses and claimed capital expenses are independently reviewed by the regulators as part of the relevant legislation under various acts, including the Electricity Act.
On the corporate governance issue, the company said four of its large companies are in the top 7% of the peer group in emerging markets or the sector or the world. On the leverage against shares (LAS) issue, the company said the overall promoter leverage is less than 4% of the promoter holding.
On Thursday, the Adani group threatened to take legal action against Hindenburg Research, saying the “maliciously mischievous, unresearched” report had adversely affected the group, its shareholders and investors.
In response, Hindenburg had said: “Regarding the company’s threats of legal action, to be clear, we will welcome it. We fully stand by our report and believe any legal action against us would be meritless.” The statement went on to add: “If Adani is serious, it should also file suit in the US where we operate. We have a long list of documents we would demand in a legal discovery process.”
