Adani Total Gas Auditor Shah Dhandharia resigns amid Hindenburg Report fallout
A small Ahmedabad-based chartered accountancy firm – Shah Dhandharia, whose appointment was questioned by a US short seller in its scathing report against the conglomerate run by billionaire Gautam Adani, has resigned due to “pre-occupation”. This was announced by Adani Total Gas Ltd in a statement.
Hindenburg Research in its January 24 report that levelled allegations of fraud, stock manipulation, and money laundering against the Adani Group, had also raised the issue of the size and capability of the firms auditing the conglomerate. The firm has not yet resigned from Adani Enterprises.
Hindenburg stated that the independent auditor for the group’s flagship firm, Adani Enterprises, and its city gas retailer Adani Total Gas Ltd is a “tiny firm” called Shah Dhandharia. “Shah Dhandharia seems to have no current website. Historical archives of its website show that it had only 4 partners and 11 employees. Records show it pays Rs.32,000 (USD 435 in 2021) in monthly office rent. The only other listed entity we found that it audits has a market capitalization of about Rs.640 million (USD 7.8 million),” it stated.
Hindenburg had questioned the Adani group’s decision to give such a big audit mandate to a virtually unknown firm and claimed that the audit partner who signed off on ATGL audits was only 23 years old when he was first appointed. It also claimed that the audit partner at Shah Dhandharia who signed off on the audits of Adani Enterprises was only 24 years old when he started. Both are now just 28 years old.
Shubham Rohatgi, who signed off the ATGL’s audit for the 2022-23 fiscal on May 2, 2023, on behalf of Shah Dhandharia & Co LLP was also red-flagged by proxy advisory firm Institutional Investor Advisory Services (IiAS) in July 2022.
In a stock exchange filing, Adani Total Gas Ltd said, “We wish to inform that M/s. Shah Dhandharia & Co. LLP, Chartered Accountants, have resigned as the statutory auditors of the company i.e., Adani Total Gas Limited (ATGL) with effect from Adani Total Gas Ltd.” Company attached the May 2, 2023 resignation letter from the auditor.
In the letter, the controversial auditor said it was given a second term of 5 years on July 26, 2022, and has completed the company’s audit for the financial year ended March 31, 2023. “We have carefully evaluated and due to increased professional pre-occupation with other assignments, we regrettably propose our resignation,” it said. “Our resignation does not result from an inability to obtain sufficient appropriate audit evidence,” it added.
“There are no other circumstances connected with our resignation which we consider should be brought to the notice of the Board…. In view of the above and as discussed and agreed with the management, we express our inability to continue as the statutory auditors for the company. Please accept our resignation with immediate effect,” said the auditing firm.
It is not known if the chartered accountancy firm would also step down at Adani Enterprises. The board of directors of the group’s flagship, which houses businesses such as airports and data centres, is due to meet on May 4 to consider its financial results. The Adani Group has been under siege since allegations of fraud, corruption, stock manipulation and money laundering were levelled by Hindenburg. The US short seller also charged the group with using a vast network of shell companies in opaque financial transactions.
The report led to at one stage wiping out almost USD 140 billion of the Adani group’s market capitalisation.
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