MUMBAI: In early December 2015, Deloitte resigned as auditor of Alok Industries. The unusual decision — as few companies change auditor in the middle of the year — was informed to stock exchanges.
But the brief communique went largely unnoticed as most analysts had by then stopped tracking the debt-ridden textile company which, together with its subsidiaries, had borrowed close to Rs 20,000 crore from banks in India. After four months, banks are now about to order an audit to trace the “end use of loans” taken by Alok. Last week, the lenders, led by State Bank of India, sounded out firms such as Chokshi & Chokshi and Grant Thornton to carry out a forensic audit of Alok.
The joint forum of lenders will meet this week to take a final decision. A forensic audit could not only reveal if there were any instances of fund diversion by the company but also bring out possible lapses, if any, of past audits. According to a senior banker, Deloitte stepped down almost immediately after SBI officials held a meeting to discuss the financials of Alok with one of the partners of the Big 4 firm.
Deloitte officials refused to comment when asked about the meeting. An employee of the PR firm hired by Deloitte said, “As per our consistent policy, Deloitte does not comment on client confidential matters.” Surendra Jiwrajka, an executive director at Alok, said, “The reason for Deloitte’s resignation was purely commercial in nature.
Alok Industries, another of highly placed Modi Crony? I guess? Will The chairman flee the country with Modi Help? 20,000 Crore is $3 Billion.
Considering the increase in number, size and complexity of transactions, Deloitte required an interim hike in their remuneration which was significant and not possible for the company.” Responding to ET’s email query, Jiwrajka said that to the best of their knowledge there was no such meeting between Deloitte and the banks.
When asked to comment on creditors’ suspicion about possible gaps in the books of Alok Industries, Jiwrajka said, “The banks have never asked us for even a clarification thus far in this regard. There has never been any such mention in our accounts till date either. Besides, no auditor would take up the assignment if there were to be the existence of such a lacuna in the balance-sheet and even banks would not have supported us all the way they have so far.”
Deloitte gave a no-objection certificate, as required under the rules of Institute of Chartered Accountants of India, to Shah Gupta & Co, the chartered accountants firm which replaced Deloitte as one of the auditors of Alok. Banks, which had invoked the strategic debt restructuring provision to convert some of the loans into equity and offload the stake to a strategic investor, were also planning to rope in a consultant that would monitor the cash-flow of Alok. They were in touch with the business advisory firm Alvarez & Marsal for the assignment.