India's Reliance Capital rejects PwC's observations after auditor quits (updated)

Reliance Home Finance

13/06/2019 09:55

(Adds further details from statement, updates share price move)
    By Promit Mukherjee and Derek Francis
    MUMBAI/BENGALURU, June 13 (Reuters) - Reliance Capital
 RLCP.NS  said on Thursday the observations of global audit firm
PwC about its fiscal accounts were "completely baseless and
unjustified", after PwC in a surprise move resigned earlier this
week as the auditor of the non-banking financial company (NBFC).
    In a letter to Reliance Capital, PwC said it felt compelled
to withdraw from the audit of the company's fiscal year 2018/19
accounts after not receiving a "satisfactory response" to its
queries on certain observations in its assessment, Reliance
Capital said in a statement on Wednesday.  urn:newsml:reuters.com:*:nL2N23J063
    Shares in Reliance Capital have declined for two straight
days after the announcement of PwC's resignation. 
    Reliance Capital said on Thursday PwC's move was driven by
"fear psychosis" and that the company acted prematurely without
even a statutory discussion with the audit committee.
    PwC pointed out irregularities in the books of accounts of
Reliance Capital and Reliance Home Finance  RLIC.NS  around the
alleged diversion of funds, and concerns with some related party
transactions, the Economic Times reported https://economictimes.indiatimes.com/industry/services/consultancy-/-audit/pwc-red-flags-holes-in-reliance-capital-home-finance-books/articleshow/69764520.cms
 on Thursday.
    PwC said it does not comment on client-specific matter when
contacted by Reuters.
    Reliance, in its statement, rebutted the allegations, saying
there was "no question of diversion" and that it had used all
resources purely toward supporting its group debt.
    Anil Ambani, chairman of the diversified financial services
conglomerate, said in a conference call on Tuesday that the
group companies were facing the brunt of "unwarranted
rumour-mongering."  urn:newsml:reuters.com:*:nL4N23I1XS
    He said his companies had paid back 350 billion rupees
($5.05 billion) in the last 14 months and that he was committed
to meeting all debt obligations in a timely manner.
    In the last two years, Ambani has had to sell or put on
block several assets to pare debt in his group companies. 
    PwC's resignation comes at a time when bankers and investors
have raised concerns of a deeper malaise in the country's shadow
banking sector after private home mortgage lender Dewan Housing
Finance Corp Ltd's (DHFL)  DWNH.NS  shares tanked last week
following a sharp ratings downgrade. urn:newsml:reuters.com:*:nL4N23C2X3
    The DHFL crisis followed the fall of a leading private NBFC,
Infrastructure Leasing and Financial Services Ltd, in September.
IL&FS's collapse roiled markets, spooked investors and prompted
the government to step in and take control of the company to
limit fears of a contagion.
    Shares of Reliance Capital were down 6.2% and those of its
sister concern Reliance Home Finance  RLIC.NS  were 12.3% lower
at 0745 GMT on Thursday, while the broader Nifty index  .NSEI 
was down 0.45%.
    ($1 = 69.3550 Indian rupees)

 (Reporting by Promit Mukherjee in Mumbai and Derek Francis in
Bengaluru; Editing by Subhranshu Sahu)
 ((derek.francis@thomsonreuters.com; +91-9986311363; Tweet to
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