Adani Group to hire a Big 4 firm for ‘general audit’: TotalEnergies

Adani Group will hire one of the “big four” accounting firms to carry out a “general audit” of its business, one of its international partners – TotalEnergies has said.

The group may hire Deloitte, EY, KPMG, or PwC. However, Adani Group nor the accounting firms have made any official statement on this.

To audit its 2021-22 accounts, Adani Enterprises used Ahmedabad-based Shah Dhandharia & Co, according to its annual report which is available on the company’s website.

Also read: Committed to ensuring market integrity: SEBI allays fears amid Adani row

In its report, Hindenburg had raised serious questions about Dhandharia & Co saying it hardly seemed capable of complex audit work.

Now, Dhandharia & Co’s website is not accessible.

‘Tiny and unknown firm’

Hindenburg said Adani Group used auditing partners who “were as young as 24 and 23 years old” to approve annual audit reports at the two subsidiaries.

“Given the complexity of Adani’s listed companies, with hundreds of subsidiaries and thousands of interrelated dealings, why did Adani choose this tiny and virtually unknown firm instead of larger, more credible auditors?” Hindenburg asked.

Also read: Stock plunge to hurt Adani’s ability to raise funds: Moody’s

As per Hindenburg, “tiny” Shah Dhandharia & Co has only 11 employees.

In its response to Hindenburg’s allegations, Adani Group said, “All these auditors who have been engaged by us have been duly certified and qualified by the relevant statutory bodies who are responsible to determine these benchmarks. All our auditors have been appointed in compliance with applicable laws.”

“The financials and public documents of the Adani portfolio entities clearly disclose Shah Dhandharia & Co as our auditor to all regulators and stakeholders and hence, it is unclear what new findings are being brought to light by Hindenburg,” the company added.

TotalEnergies’ investments

France’s TotalEnergies issued a statement on Friday (February 3) in which it said it invested in Adani Group companies in full compliance with Indian laws, and with its own internal governance processes.

Also read: All about Hindenburg Research, the US firm that has taken on Gautam Adani

“TotalEnergies’ investments in Adani’s entities were undertaken in full compliance with applicable – namely Indian – laws, and with TotalEnergies’ own internal governance processes. The due diligence, which were carried out to TotalEnergies’ satisfaction, were consistent with best practices, and all relevant material in the public domain was reviewed, including the detailed disclosures to regulators required under applicable laws,” the company said in a media statement.

“TotalEnergies welcomes the announcement by Adani to mandate one of the “big four” accounting firms to carry out a general audit,” it added.

This statement came in the aftermath of stock prices of Adani Total Gas Ltd and Adani Green Energy Ltd plunging about 60 per cent since January 24.

Also read: Adani Enterprises to be dropped from Dow Jones sustainability indices

TotalEnergies said its exposure to Adani Group companies was $3.1 billion of capital employed at the end of December, a small fraction of the energy giant’s globe-spanning interests.

Adani Group, which has lost more than $100 billion in market value since Hindenburg Research accused it of stock manipulation and accounting fraud in the January 24 report, has partnerships with TotalEnergies in gas and renewable energy.

Adani Group has denied any wrongdoing and has threatened to sue Hindenburg.

The French firm owns a 37.4 per cent stake in Adani Total Gas Ltd, which sells CNG to automobiles and piped natural gas to households and industries, and 50 per cent in Adani Total Private Limited, which is developing a liquefied natural gas import terminal.

In 2020, it bought 19.75 per cent in renewables unit Adani Green Energy Ltd and a stake in solar assets for $2.5 billion.

“The entities TotalEnergies has invested in with Adani are managed in accordance with applicable regulations. The day-to-day operations of the entities listed in India, Adani Total Gas Limited (ATGL) and Adani Green Energy Limited (AGEL), are managed by independent teams of professional managers, and their boards are composed of at least 50 per cent independent and non-executive directors,” the statement said.

TotalEnergies’ exposure resulting from these stakes is limited, as it represents 2.4 per cent ($3.1 billion as of December 31, 2022) of the company’s capital employed and only $180 million of net operating income in 2022.

“These investments being accounted for under the equity method, TotalEnergies has not performed any re-evaluation in its accounts of its stakes in the listed entities ATGL and AGEL in relation to the increase in their stock values,” the statement added.

TotalEnergies is also partnering Adani in the planned production of green hydrogen.

(With agency inputs)