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Anil Ambani company Reliance Infra's auditors reveal all, say there is missing money on balance sheet

Katya Naidu | Jun 17, 2019, 08.45AM IST

  • A material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern, Rel infra's auditor said.
  • Over ₹71 billion in deposits and advances were questioned by the auditors.
  • In the last week, Reliance Capital too ran into trouble with auditors PwC.
After investors, it is time for auditors to jump Billionaire Anil Ambani’s ship. Within a week of PriceWaterhouseCoopers quitting as auditors of Reliance Capital and Reliance Home Finance, Reliance Infrastructure’s auditors pointed out irregularities in the balance sheet of yet another group company, Reliance Infrastructure.

The stock of Reliance Infrastructure hit lower circuit at ₹53.40 today.

“We were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone annual financial results,” the auditors Pathak H D& Associates, in a letter enclosed with the quarterly results of the company.


Show me the Money

The auditors were referring to various amounts mentioned by Reliance Infra as ‘recoverables’ like ₹71 billion (₹7,083 crore) which comprised of inter-corporate deposits including interest and advances. Reliance Infrastructure also claimed to have given corporate guarantees to the tune of ₹17.7 billion (₹1,775 crore) in favour of the aforesaid borrowings, which too auditors find no evidence of.

The auditors are unsure if such ‘adjustments, restatement, disclosures or compliances’ are necessary.

Reliance Infrastructure has claimed to have given these amounts as working capital to companies which are engaged in construction of its infrastructure projects. “We were unable to obtain sufficient appropriate audit evidence about the relationship of the aforementioned party with the Company, the underlying commercial rationale/purpose for such transactions relative to the size and scale of the business activities with such party and the recoverability of these amounts.

Reliance Infrastructure however is back to assuring investors. “There is a mismatch of cash flow right now, but we will be debt-free once we exit our road projects,” said Punit Garg, CEO of the company told ET.

Doubts on ability
The company’s result announcement was deferred twice along with that of sister company, Reliance Power. It finally declared a net loss of ₹33 billion (₹3,301 crore) on June 14, which is the highest ever loss it had suffered.

The company also refused to declare impairment on recoverables for an investment of Rs 5,213 crore in Reliance Power, which amounts to Rs 1,219 crore. Impairment costs are declared when the asset value significantly declines.

“The factors more fully described in the aforesaid Note, relating to losses incurred during the year and certain loans for which the Company is guarantor indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern,” the auditors said.


Independence impaired
The trouble brewing at Anil Ambani group companies has hit crisis levels in the last couple of weeks. One of the many was PwC, one of the big four accounting companies, quit saying that ‘their independence is impaired and were unable to finish the audit’.

After they quit, Reliance Capital went out of its way to assure that no money was being diverted.

“There is no question of diversion; zero loans and or liquidity have been provided by any lender in the PwC audited period. Reliance Capital is confident the independent report of the continuing auditor will establish that there are no irregularities,” the company had said in a statement. PwC on the other hand said that

All this bad news is flowing within a week of Anil Ambani addressing media in a conference call assuring investors that he will service his debt, and has already paid back ₹350 billion in the last 14 months.

SEE ALSO
The auditor to Anil Ambani firm Reliance Capital says it wasn't allowed to do its job
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