Reliance Capital on Thursday said its auditor Price Waterhouse & Co’s (PwC) allegations against the company are “completely baseless and unjustified”.
On June 12, PwC — one of Reliance Capital’s statutory auditors — resigned and sent a letter saying that it felt compelled to withdraw from the audit of the company’s fiscal year 2018-19 accounts after not receiving a “satisfactory response” to its queries on certain observations in its assessment.
Countering this, a Reliance ADA Group spokesperson said: “PwC has acted prematurely without even statutory discussions with the audit committee.” Reliance Capital also said that it does not agree with the reasons given by PwC. “The company has duly responded to the various queries and letters of PwC, and has also duly and validly convened a meeting of the audit committee on June 12 to respond to the letter dated May 14 from PwC. The company expected PwC to have participated in the meeting of the Audit Committee and not resign on the eve of,” the spokesperson said.
“The company has also duly furnished all requisite and satisfactory details as required by PwC, especially including certification and confirmations of the transactions in question,” he added.
In the absence of PwC, Pathak HD and Associates will continue as Reliance Capital’s auditor.
Pathak has the mandate to submit its independent report on PwC’s observations within 15 days.
The Reliance Capital spokesperson also asserted that zero loans or liquidity were provided by any lender during the PwC audit period, something which Group Chairman Anil Ambani clarified in a conference call on June 10.
“Reliance Capital is by law required to fund only group entities, being a Core Investment Company (CIC),” the spokesperson said.
He added that all resources have been utilised purely to support group debt servicing of ₹35,000 crore in the past 14 months. Reliance Capital is confident that the independent report of the continuing auditor will establish that there are no irregularities, he added.
Shares of Reliance Capital have declined on a trot after the announcement of PwC’s resignation.
Shares closed at ₹84.40, down 3.54 per cent compared to the previous day’s close.
In a related development, Reliance Nippon Life Asset Management (RNAM), a Reliance Group unit, concluded its OFS (offer for sale), which was over subscribed by 2.5 times.
The OFS managed to raise ₹375 crore by selling RNAM shares. “With this, the public float will cross 25 per cent and the balance 31.5 per cent will be sold to Nippon, paving the way for closure of RNAM transaction,” said a Reliance Capital spokesperson.
By doing this, the Reliance Capital is looking to raise up to ₹6,000 crore as part of an agreement with Japan’s Nippon Life, under which the Anil Ambani-led firm will sell its entire shareholding in Reliance MF, and exit the mutual fund business.