All ten companies under the Adani Group umbrella faced a notable decline in their stock prices after reports surfaced about an investigation by the National Financial Reporting Authority (NFRA), an accounting regulator, regarding one of the group's auditors. As of approximately 10:40 a.m., several Adani Group firms registered significant losses. Adani Enterprises saw its shares drop by more than 2 percent, while Adani Ports and Special Economic Zone (APSEZ) experienced a decline of over 1 percent. Adani Total Gas shares witnessed nearly a 4 percent decrease, and Adani Power and Adani Green Energy both saw their stock prices fall by over 4 percent. Adani Transmission and Adani Wilmar faced reductions of over 2 percent each. Furthermore, other Adani-affiliated companies like Ambuja Cement, ACC, and NDTV also observed a decrease in their stock values.
The downturn in the share prices of these Adani Group entities followed a report by Bloomberg that suggested the NFRA had initiated an inquiry into one of EY's member firms in India, SR Batliboi. This inquiry sought access to documents and communications linked to audits of Adani-controlled companies dating back to 2014. As of now, the duration and potential ramifications of NFRA's investigation remain uncertain, and neither NFRA nor the Adani Group has issued official statements on the matter.
This scrutiny of SR Batliboi, which serves as the statutory auditor for five publicly traded Adani companies, accounting for approximately half of the group's revenues, underscores ongoing concerns regarding accounting practices and disclosures within the sprawling conglomerate. Earlier this year, the Adani Group faced a significant attack by short-sellers, which it strongly refuted. This led to India's market regulator launching a court-ordered investigation into the group.
It's worth noting that EY operates in India through independently managed affiliates because Indian law prohibits foreign accounting firms from registering as auditors in the country. In a report from January, Hindenburg raised questions about Adani's accounting and audits, leading to a substantial decline in the market value of the group's publicly listed companies. Subsequent to the release of the report by the short-seller, various changes have taken place concerning auditors. For instance, Adani Total Gas appointed a new statutory auditor, Walker Chandiok & Co LLP, replacing Shah Dhandharia & Co., a longstanding auditor for Adani companies. Deloitte Haskins & Sells LLP also expressed concerns about inadequate disclosures regarding Adani Ports' dealings with specific entities before resigning in August. Some auditors have reportedly hesitated to take on Adani Group companies as clients due to concerns about the group's aggressive expansion driven by debt.
According to the Bloomberg report, SR Batliboi's most extended ongoing assignment within the Adani Group is with Adani Power. Over the course of five years, beginning in 2018, this assignment raised accounting concerns, particularly related to the valuation of a substantial unprofitable plant. Each year, despite the auditor's concerns, the company proceeded with its own valuation of the plant, leading to an unusually protracted dispute. The report also highlighted that SR Batliboi had previously crossed paths with NFRA regarding an accounting scandal at Infrastructure Leasing & Financial Services Ltd. (IL&FS), an infrastructure development company, in 2018. Last year, NFRA ruled that SR Batliboi had failed to adhere to fundamental audit requirements and was unfit for its role due to EY's simultaneous provision of non-audit services to IL&FS.
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