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Deloitte flags issues in Adani Ports deals, cites need for review


Adani Ports & Special Economic Zone Ltd.’s auditor sounded a note of caution over insufficient disclosures around the company’s transactions with certain entities, returning the spotlight to allegations made by short seller Hindenburg Research on Gautam Adani’s empire.

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.

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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 percent 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.

Read more:

India market regulator proposes more disclosures from ‘high-risk’ foreign funds

Cash-hungry Adani utility shows funding urgency to power India

Adani Group stocks surge after court panel finds no proof of price manipulation

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Abu Dhabi Overtakes Oslo for Sovereign Wealth Fund Capital in Global SWF’s First City Ranking

Today, industry specialist Global SWF published a special report announcing a new global ranking of cities according to the capital managed by their Sovereign Wealth Funds (SWFs). The findings show that Abu Dhabi is the leading city that manages the most SWF capital globally, thanks to the US$ 1.7 trillion in assets managed by its various SWFs headquartered in the capital of the UAE. These include the Abu Dhabi Investment Authority (ADIA), Mubadala Investment Company (MIC), Abu Dhabi Developmental
Holding Company (ADQ), and the Emirates Investment Authority (EIA). Abu Dhabi now ranks slightly above Oslo, home to the world’s largest SWF, the Government Pension Fund (GPF), which manages over US$ 1.6 trillion in assets. Abu Dhabi and Oslo are followed by Beijing (headquarters of the China Investment Corporation), Singapore (with GIC Private and Temasek Holdings), Riyadh (home to the
Public Investment Fund), and Hong Kong (where China’s second SWF, SAFE
Investment Corporation, operates from). Together, these six cities represent two thirds
of the capital managed by SWFs globally, i.e., US$ 12.5 trillion as of October 1, 2024.
For the past few decades, Abu Dhabi has grown an impressive portfolio of institutional
investors, which are among the world’s largest and most active dealmakers. In addition
to its SWFs, the emirate is home to several other asset owners, including central banks,
pension funds, and family offices linked to member of the Royal Family. Altogether, Abu
Dhabi’s public capital is estimated at US$ 2.3 trillion and is projected to reach US$ 3.4
trillion by 2030, according to Global SWF estimates.
Abu Dhabi, often referred to as the “Capital of Capital,” also leads when it comes to
human capital i.e., the number of personnel employed by SWFs of that jurisdiction, with
3,107 staff working for funds based in the city.
Diego López, Founder and Managing Director of Global SWF, said: “The world ranking
confirms the concentration of Sovereign Wealth Funds in a select number of cities,
underscoring the significance of these financial hubs on the global stage. This report
offers valuable insights into the landscape of SWF-managed capital and shows how it is
shifting and expanding in certain cities in the world.”

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AM Best Briefing in Dubai to Explore State of MENA Insurance Markets; Panel to Feature CEOs From Leading UAE Insurance Companies

AM Best will host a briefing focused on the insurance markets of the Middle East and North Africa (MENA) on 20 November 2024, at Kempinski Central Avenue in Dubai.
At this annual regional market event, senior AM Best analysts and leading executives
from the (re)insurance industry will discuss recent developments in the MENA region’s
markets and anticipate their implications in the short-to-medium term. Included in the
programme will be a panel of chief executive officers at key insurance companies in the
United Arab Emirates: Abdellatif Abuqurah of Dubai Insurance; Jason Light of Emirates
Insurance; Charalampos Mylonas (Haris) of Abu Dhabi National Insurance Company
(ADNIC); and Dr. Ali Abdul Zahra of National General Insurance (NGI).
Shivash Bhagaloo, managing partner of Lux Actuaries & Consultants, will his present
his observations in an additional session regarding implementation of IFRS 17 in the
region. The event also will highlight the state of the global and MENA region
reinsurance sectors, as well as a talk on insurance ramifications stemming from the
major United Arab Emirates floods of April 2024. The programme will be followed by a
networking lunch.
Registration for the market briefing, which will take place in the Diamond Ballroom at the
Kempinski hotel, begins at 9:00 a.m. GST with introductory comments at 9:30 a.m.
Please visit www.ambest.com/conference/IMBMENA2024 for more information or to
register.
AM Best is a global credit rating agency, news publisher and data analytics
provider specialising in the insurance industry. Headquartered in the United
States, the company does business in over 100 countries with regional offices in
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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Future of Automotive Mobility 2024: UAE Leads the Charge in Embracing Digital Car Purchases and Alternative Drivetrains

-UAE scores show highest percentage among the region in willingness to purchase a car
completely online
– Openness to fully autonomous cars has grown to 60% vs previous 32%.
– More than half of UAE respondents in the survey intend to move to hybrid cars during
next car purchase, while less than 15% intend to move to fully electric car.
– UAE sees strong use of new mobility services such as ride-hailing (Uber, Careem, Hala
Taxi)
– The perceived future importance of having a car is not only increasing in UAE but is
higher than any other major region globally, even China

Arthur D. Little (ADL) has released the fourth edition of its influential Future of Automotive Mobility (FOAM) report, presenting a detailed analysis of current and future trends in the automotive industry. This year’s study, with insights from over 16,000 respondents across 25 countries, includes a comprehensive focus on the United Arab Emirates (UAE). The report examines car ownership, electric vehicles,
autonomous driving, and new mobility services within the UAE.

“The UAE is at the forefront of automotive innovation and consumer readiness for new mobility
solutions,” said Alan Martinovich, Partner and Head of Automotive Practice in the Middle East
and India at Arthur D. Little. “Our findings highlight the UAE’s significant interest in
transitioning to electric vehicles, favorable attitudes towards autonomous driving technologies,
and a strong inclination towards digital transactions in car purchases. These insights are critical
for automotive manufacturers and policymakers navigating the evolving landscape of the UAE
automotive market.”
Key Findings for the UAE:
1. Car Ownership:
o Over half of UAE respondents perceive that the importance of owning a car is
increasing, with the study showing the increase higher than any other major
region, including China.
o Approximately 80% of UAE respondents expressed interest in buying new (as
opposed to used) cars, above Europe and the USA which have mature used
vehicle markets

2. Shift to Electric and Hybrid Vehicles:
o While a high number of UAE respondents currently own internal combustion
engine (ICE) vehicles, more than half intend that their next vehicle have an
alternative powertrain, with significant interest in electric and plug-in hybrid
(PHEV) options. Less than 15% plan to opt for pure battery electric vehicles
(BEVs).

3. Emerging Mobility Trends:

o Ride-hailing services are the most popular new mobility option among UAE
residents, with higher usage rates than traditional car sharing and ride sharing.
The study indicates a strong openness to switching to alternative transport modes
given the quality and service levels available today.

4. Autonomous Vehicles:
o UAE consumers are among the most open globally to adopting autonomous
vehicles, with a significant increase in favorable attitudes from 32% in previous
years to 60% this year versus approximately 30% in mature markets. Safety
concerns, both human and machine-related, remain the primary obstacles to
broader adoption.

5. Car Purchasing Behavior and Sustainability:
o The internet has become a dominant channel for UAE residents throughout the car
buying process, from finding the right vehicle to arranging test drives and closing
deals. UAE car buyers visit dealerships an average of 3.9 times before making a
purchase, higher than any other region in the world, emphasizing the need for
efficient integration of online and offline experiences.
o Upwards of 53% of respondents from the region would prefer to ‘close the deal’
and complete the purchase of their car online, which is the highest for any region
in the world.
o Sustainability is a key factor cited by UAE consumers as influencing car choice.
The UAE scored among the top half of regions, highlighting the importance of
environmental considerations.

“Our study confirms the promising market opportunities for car manufacturers (OEMs) and
distributors in the UAE” commented Philipp Seidel, Principal at Arthur D. Little and co-Author
of the Global Study. “Consumers in the Emirates show a great and increasing appetite for cars
while being among the most demanding globally when it comes to latest vehicle technologies
and a seamless purchase and service experience.”
The comprehensive report, “The Future of Automotive Mobility 2024” by Richard Parkin and
Philipp Seidel, delves into global automotive trends and their impact on various regions,
including the UAE. This study is an invaluable tool for industry stakeholders seeking to navigate
and leverage the dynamic changes driving the future of mobility.

 

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