After the rating downgrades of Reliance ADA Group companies, a statutory auditor has resigned from Reliance Capital (RCap), a systemically important non-deposit taking NBFC, and its subsidiary Reliance Home Finance (RHF).
Price Waterhouse & Co (PwC) has resigned as one the statutory auditors of RCap with effect from June 11. The reason cited by PwC, via separate stock exchange filings by RCap and RHF, is that as part of the ongoing audit for FY19, it noted certain observations/transactions which, in its assessment, if not resolved satisfactorily, might be significant or material to the financial statements, and that it did not receive satisfactory response to its queries.
Both the Reliance companies said PwC cited their failure to convene audit committee meetings within the expected time, despite multiple letters of intent sent to them, as one of the reasons for the resignation.
“According to PwC, these actions by the company have prevented it from performing its duties as statutory auditors and exercising independent judgment in making a report to the members of the company, and impaired its independence, and hence, it is no longer in a position to complete the audit and instead feels compelled to withdraw from the audit engagement and resign,” said the individual filings.
RCap and RHF said they do not agree with the reasons given by PwC for the resignation. They duly responded to the various queries and letters of PwC and also convened a meeting of the audit committee on June 12, they added.
“The company expected PwC to have participated in the meeting of the audit committee and not resigned on the eve thereof,” said the filings. The companies said they will ensure that PwC’s observations are fully examined by the continuing statutory auditor — Pathak HD & Associates for RCap and a new statutory auditor for RHF — before finalising the audit for the accounting year ended March 31, 2019. They further said they might initiate legal proceedings against PwC.
RCap shares closed at ₹87.50 on Wednesday, down 6.82 per cent, on the BSE. RHF shares closed at ₹17.05, down 3.94 per cent.
ICICI Securities, in a report, said that following the recent rating downgrade of subsidiaries to ‘default’, the resignation of the auditor comes as a major setback for the parent company.
PwC’s resignation comes in the backdrop of Chairman Anil Ambani on Tuesday emphatically stating that the group is servicing its debt payments and will continue to reduce its arrears.