Adani Group has used a tiny 11-employee firm to audit $100 billion businesses.

The Adani Group used a tiny accounting firm with just 11 employees, some as young as 23, to audit the finances of two key subsidiaries worth $100 billion, according to vociferous claims by Hindenburg Research.

As of Thursday, billionaire Gautam Adani’s business empire has lost a whopping $108 billion after Hindenburg accused him Jan. 24 of overseeing “the biggest scam in corporate history.” The Indian conglomerate has been forced to back out of a $2.5 billion share sale planned this week.

One of the key red flags raised by Hindenburg in connection with the alleged mismanagement of the Adani Group involved its use of Shah Dhandharia, which audited the flagship Adani Enterprises and Adani Total Gas.

Based in the Indian city of Ahmedabad, the firm used audit partners “who were only 24 and 23 years old” to approve annual audit reports at two subsidiaries, according to Hindenburg, who received and released copies of IDs. and government records proving their age.

“They, in fact, had just graduated from high school and were unlikely to be able to scrutinize and hold accountable the financial performance of some of the largest companies in the country, which are run by one of the most powerful people,” the Hindenburg report says.

Hindenburg said the audit firm’s website went down in the midst of the investigation. The firm allegedly operates from a small office and was paying $435 monthly in rent in 2021.

Shah Dhandhariya’s website is no longer active, but archived versions of the page list only four partners out of the firm’s 11 employees. In addition, Hindenburg said it found records of another client who used the services of Shah Dhandhariya, a small company called Globe Textiles with an estimated value of less than $8 million.

An influential short seller claimed to have uncovered “brazen accounting fraud, stock fraud and money laundering” in Adani for “decades”. Hindenburg said his findings are based on a two-year investigation.

Gautam Adani’s personal fortune has fallen to $62 billion from $125.5 billion since the release of the Hindenburg Report, dropping him from No. 3 on Forbes’ list of the world’s richest people to No. 17 as of Thursday. Once Asia’s richest man, Adani was surpassed on this list by Indian Muhesh Ambani.

Hindenburg asked the Adani Group to answer 88 questions about its practice, some of which related to its use of Shah Dhandharia for audit services.

“Given the complexity of Adani’s listed companies, with hundreds of subsidiaries and thousands of interconnected transactions, why did Adani choose this tiny and virtually unknown firm over larger, more trusted auditors?” Hindenburg asked.

Adani Group vehemently defended its decision to hire Shah Dhandhariya and denied other wrongdoing as part of a massive 413-page rebuttal to the Hindenburg report.

“All of these auditors that we have hired have been properly certified and qualified by the relevant government authorities that are responsible for setting these benchmarks,” the Adani Group said in a response. “All of our auditors have been appointed in accordance with applicable law.”

“The financial and public documents of the companies in the Adani portfolio clearly disclose Shah Dhandharia & Co as our auditor to all regulators and stakeholders, and therefore it is not clear what new conclusions Hindenburg is making,” the company added.

The Adani Group also accused Hindenburg of showing a “brazen disregard for privacy and security” by releasing information about Shah Dhandhariya, including pictures of their ID cards.

Separately, Adani Group CFO Jugeshinder Singh criticized Hindenburg during an interview with India’s Business Today.

“Do you think that as a large Indian corporation we are not responsible for the development of Indian suppliers? We are not responsible for the development of the Indian institutional structure?” Singh said.

“So, if we are supporting the development of a small firm to become a real, good accounting firm, what’s wrong with that? Isn’t this our responsibility? We have 21,000 small suppliers,” added Singh.

The company dismissed Hindenburg’s accusations of poor accounting and other wrongdoing as unfounded and threatened to sue the short seller.

In a scathing response to the 413-page report, Adani Hindenburg noted that the company did not answer 62 of the 88 specific questions.

“The fraud cannot be masked by nationalism or a bloated response that ignores every key accusation we have made,” Hindenburg said.

The Post has reached out to Shah Dhandhariya, Adani Group and Hindenburg Research for additional comment.