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Says, he'll complain to Sebi, ICAI
October, 20th 2009

Our report is independent, say auditors.

A day after the Securities and Exchange Board of India (Sebi) said it would investigate reports of audit discrepancies by Reliance Communications (RCom), Anil Ambani accused special auditors Parakh & Company of being completely unilateral, biased and prejudiced.

In a hastily organised tele-conference at which no counter-questions were permitted, Ambani said he would take up the conduct and actions of Jaipur-based Parakh and Company with the Institute of Chartered Accountants of India (ICAI).

Ambani also said he will ask Sebi to investigate the hammering of the RCom scrip in the last few days. Today, the company's share price fell a second day on the Bombay Stock Exchange to close at Rs 228.95, down 2.75 per cent. Yesterday, the share price slipped nearly 7 per cent.

Ambani said he would also lodge a formal complaint with the cyber-crime police  to investigate the dissemination of false and malicious e-mails against the group from bogus IDs.

Ambani accused the special auditors of working at the instance of corporate rivals. As a result, he said, they have recorded unwarranted and completely incorrect findings on matters beyond the scope of their audit, thereby again demonstrating their bias and prejudice.

He  also alleged that, contrary to basic standards of professional conduct and  auditing norms,  the auditors had not discussed the report with RCom, even though they had conducted the audit for more than six months.

Ambani added that known corporate rivals had launched a vicious campaign against the group at a time when it is finalising an initial public offer for Reliance Infratel, RCom's subsidiary for tower infrastructure.

Ambani reiterated that there is no irregularity or discrepancy in RCom's accounts, which have been duly audited by statutory auditors like KPMG and were also subjected to peer group review of auditors by Sebi as recently as May 2008.

He said RCom was voluntarily declaring all information on revenues to the government and Trai and would pay the government whatever is legitimately due.

Asked to respond to Ambani's allegations, Prakash Sharma, Parakh & Co told Business Standard: We have given our report independently without any influence, after following all audit standards and practices.

Sharma added that a copy of the report had been given to RCom yesterday, after it was submitted to the Department of Telecommunications (DoT), which had requisitioned the audit. The firm will reply to all allegations after receiving a written notice from the company or the ICAI, Sharma added.

He said DoT had given the audit firm 16 points of reference to which they have made their observations and it is for the government to take action.

The action the government takes on the findings of the report is crucial for RCom as well as the Reliance Infratel IPO for which 10 per cent of the shares will be up on offer. .

RCom, which operates both CDMA and GSM services, controls a 26 per cent market share of the Indian mobile market with over 85 million wireless subscribers.

The audit report had found that RCom  had under-reported revenues that, in turn, impacted licence and spectrum fees it pays the government.

The special auditors  noted that the company under-reported its wireless revenues of Rs 2,799.19 crore to the Telecom Regulatory Authority of India (Trai)  for the financial years 2006-7 and 2007-8, costing the government Rs 315.9 crore in fees that are charged as a percentage of revenue.

The audit report also said during 2007-08, RCom's actual wireless revenue was Rs 12,298 crore, but it inflated the figure by 23 per cent to Rs 15,213 crore in the shareholders report, leaving a gap of Rs 2,915 crore.

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