Deloitte Haskins & Sells LLP raised concerns on Tuesday over the port unit’s transactions with three entities, which the company said were unrelated parties. But the auditor said it couldn’t confirm that the parties were indeed unrelated, and that the firm has refused to get an independent external examination that would help prove so. It therefore signed off on the company’s books only with what’s called a “qualified opinion”.

Noting that “the evaluation performed by the group does not constitute sufficient appropriate audit evidence for the purpose of the audit,” Deloitte said that it can’t comment if the company was fully compliant with local laws.

It’s the first time that a top auditor has issued a qualified opinion on part of the port-to-power conglomerate’s books citing allegations from the US short seller report that has wiped more than $100 billion off the group’s market value. The move will renew concerns that information gaps persist in Adani’s financial dealings, and risks hampering its attempts to move past Hindenburg’s allegations of extensive corporate fraud.

“The qualified statement could be a dampener near term,” Sanford C. Bernstein analysts Nikhil Nigania and Anusha Madireddy wrote in a Tuesday report on the stock.

‘Labyrinth’ of Entities

One area highlighted by Hindenburg that’s received attention is how parties like Adani’s little-known elder brother, Vinod, is a director of several overseas firms which are either investors in or transact with the conglomerate. The US shortseller characterized this as “a vast labyrinth of offshore shell entities” that moved billions of dollars into Adani firms without disclosure “of the related party nature of the deals.”

The Adani Group has denied Hindenburg’s allegations and has maintained it is fully compliant with disclosures required under Indian laws. It is awaiting findings of a probe by India’s market regulator that needs to conclude by Aug. 14 deadline on any possible violations by the conglomerate. An expert panel appointed by India’s top court this month found no regulatory failure or signs of price manipulation in the group’s stocks in its interim report.

Here is more detail on the three transactions flagged by Deloitte:

• Adani Group signed an engineering contract with a subsidiary of a company identified in the Hindenburg report from whom 37.5 billion rupees ($453 million) was recoverable as of March 31. The auditor was told by the group that this contractor is not a related party.
• There have been financial transactions, including of equity, made with parties identified in the short seller report. Adani Group told Deloitte that these are not related parties. All payables were settled with no dues remaining.
• Adani Ports’ sale of its Myanmar port to Solar Energy Ltd., incorporated in Anguilla, earlier this month. The sale price was revised from 20.15 billion rupees to just 2.47 billion rupees and an impairment charge was taken. The group told the auditor these are not related parties.

On a call Tuesday evening with industry analysts, the management of Adani Ports said they had been working with the engineering contractor for a decade. They said it had been delivering projects on time and within cost and that Deloitte decided to qualify it pending the investigation by India’s capital markets regulator and Supreme Court.

Deloitte has also issued a qualified opinion for Adani Transmission Ltd’s financial results for the quarter through March, while auditors of other Adani Group entities — barring Adani Wilmar Ltd. and New Delhi Television Ltd. — issued similar qualified opinions on the respective financial statements, but none have specifically mentioned Hindenburg’s broadside against the conglomerate.

Deloitte is the only Adani Group auditor to raise concerns over the nature of specific transactions as part of its qualified opinion, whereas other auditors only cited the ongoing investigation by the Securities and Exchange Board of India as the basis for their opinion.

Crown Jewel

The auditor’s caution emerged as Adani’s flagship ports business reported profit of 11.59 billion rupees in the quarter through March that missed the average 15.57 billion rupee estimate from analysts surveyed by Bloomberg, marred by an impairment after it pulled out of the Myanmar.

The company houses some of Adani’s most lucrative assets and is often touted as the group’s crown jewel, with its 14 ports handling nearly a quarter of all cargo passing through India. It is also the most widely tracked Adani stock among sell-side analysts. All 20 currently covering the stock have a buy rating, data compiled by Bloomberg show.

Adani Ports forecast earnings before interest, taxes, depreciation and amortization would grow by as much as 17% in the year through March 2024, buoyed by an expansion of cargo volumes.

That guidance “reflects a resilient growth profile capable of defying a global slowdown, underpinned by earlier investments and M&A,” Denise Wong, an infrastructure analyst at Bloomberg Intelligence, wrote on Wednesday.

But growth may hinge on its ability to marshal financing and the “conclusion of regulatory probes and a stronger push to improve corporate governance,” she said.