Shares of Adani group companies ended deeply in the red on Monday falling in the range of 0.7 to 3.4 per cent, with sentiments getting dented by the resignation of Deloitte as the auditor of Adani Ports and Special Economic Zone.

Flagship Adani Enterprises ended 3.3 per cent lower and was also the worst performer in the Nifty50 index, though it recovered from a 5.5 per cent fall in intra-day trades. Ambuja Cements also ended 3.4 per cent lower. The sharp fall in prices resulted in a ₹27,000-crore erosion in the market cap of the group.

On Saturday, the company said it has accepted the resignation of Deloitte and appointed BDO International’s member firm MSKA & Associates, which audits major Nifty50 companies such as HDFC Bank and IndusInd Bank, in its place.

In its resignation letter, Deloitte said that it was resigning as a statutory auditor with immediate effect “because we are not statutory auditors of a substantial number of other Adani group companies, including an Adani group company (and its subsidiaries) after completion of our term of five years.”

In its audit report on Adani Ports, the audit firm had said that with respect to the allegations made by Hindenburg Research, “the company did not consider it necessary to have an independent external examination of these allegations,” since they were already the subject of a probe by Securities and Exchange Board of India.

Deloitte had commented that the evaluation performed by the company “does not constitute sufficient appropriate audit evidence for the purposes of our audit.” It had highlighted an EPC contract, some financing transactions, and the sale of its container terminal in Myanmar to third parties. It pointed out that in the absence of an independent examination, it was not able to comment on whether these transactions may result in possible adjustments or disclosures in the standalone financial statement in respect of related parties and whether the company should have complied with the applicable laws and regulations.

While Deloitte figures among the top four auditors globally, BDO figures among the top six. 

Negative

US Investment bank Jefferies said in a note that auditor resignations are viewed as negative “but replacement with a reputed auditor gives some comfort.” It gave examples of UPL, whose Mauritius arm’s auditor KPMG had resigned in 2020 pulling down the stocks, but Batliboi stayed on to audit its consolidated financials including Mauritius and the stock price had corrected and recovered over time.

“Operationally, Adani Ports’ medium-term double-digit growth should continue as Mundra’s market share gain story is replicated at acquired ports,” it added.

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