Anil blames rivals, calls RCom audit report biased

Reliance ADAG chairman Anil Ambani hit out at the group’s “known corporate rivals” on Thursday through a conference call for a “vicious and mala fide campaign of falsehoods,” referring to the recent report of the government appointed auditors on Reliance Communications’ revenues.

The report had shown discrepancies in Reliance Communications accounting — while it inflated the revenue to shareholders, it underreported to the telecom regulator and paid less than what it should have as licence fee and spectrum charges.

If there are any legitimate dues towards licence fee, RCom would pay it as per licence conditions, Ambani said.

But the group would lodge a formal complaint with the Securities and Exchange Board of India (Sebi) “to probe the hammering of our group stocks over the past few days,” he said.

Also, it is making a complaint with the cyber crime police authorities to “investigate the dissemination of false and malicious e-mails against our group from bogus IDs.”

In addition, the group wants to take up the conduct and actions of the special auditors with the Institute of Chartered Accountants of India (ICAI) through its statutory auditors, Ambani said.

Although he did not spell out any names, the younger Ambani brother mentioned “known corporate rivals” four times during the concall.

When contacted, telecom service providers refused to react to Ambani’s comment on campaign by “known corporate rivals”. Audit reports of other telcos — Bharti, Vodafone, Idea Cellular, and Tata Teleservices—are awaited.

Ambani did not just stop at attacking the corporate rivals, he called the auditors’ (Parakh & Compnay) report “completely unilateral, biased and prejudiced”.

He said “contrary to basic standards of professional conduct, and against all auditing norms and practices, the alleged report/findings have not even been discussed by the special auditors with RCom till date - even though they have been conducting the audit for the past more than 6 months.”

He said special auditors, “apparently at the instance of our corporate rivals have far exceeded their terms of reference and recorded unwarranted and completely incorrect findings on matters beyond the scope of their audit, thereby again demonstrating their bias and prejudice.”

But, Parakh & Company senior partner Prakash Sharma has defended the audit report that was submitted to the Department of Telecommunications (DoT) on October 7.

“When we were appointed for auditing the RCom books by DoT, we were given 16 terms of reference. Our report has covered all those 16 points, with our views and opinion,” Sharma told DNA.

He said that the auditor has submitted the report to DoT and now its up to the government to take any decision.

According to Sharma, the audit was completed after “discussions” (with the party concerned).

He also argued that all audit standards have been followed while making the report, and that the audit firm has not come under anybody’s influence.

Responding to the issue of RCOM not being given the audit report, Sharma said, “we gave it to RCom after getting the DoT permission”. The report was given to RCom on Wednesday, while it was in the public domain through media on Monday itself.
Ambani reiterated that there is no irregularity or discrepancy in RCom’s accounts.

He also pointed out that “these accounts had been duly audited by reputed statutory auditors such as KPMG”.

The accounts were also subjected to the peer group review by auditors appointed by Sebi in May 2009, he said.

These accounts have been prepared in accordance with generally accepted Indian accounting standards and principles and are in line with telecom and general industry practice, he said.

“I would also like to reiterate that RCom is fully compliant with all Sebi disclosure guidelines, listing guidelines of the stock exchanges,” and all relevant provisions of the Companies Act, 1956.”

Addressing the concall, Ambani said, “all of you from the national media are fully aware of the hands of our known corporate rivals behind these nefarious activities, including circulation of e-mails from false IDs, distribution of papers in unsigned and unmarked envelopes, spreading of false and vicious rumours regarding the company and its employees, drumming up of motivated propaganda; and unleashing a campaign of calumny and disinformation.”

According to the ADAG chairman, “this sequence of events has been accompanied by the usual hammering of our group stocks, to create panic and loss of confidence, and to cause huge losses to over 11 million loyal shareholders of our Group.”

Ambani pointed out that in 2007-08, when the group was launching the Reliance Power IPO,  “there was a similarly vicious campaign of disinformation and hammering of our stocks to sabotage the IPO.”

He added that “this time too, all these events are being stage-managed and blown out of proportion by our known corporate rivals, at a time when there are important developments concerning our group.”

He listed the important developments as filing of the draft prospectus for Reliance Infratel IPO and the Supreme Court hearing on the gas issue next week.

On the Reliance Infratel IPO, he said, “we hope to go ahead with it, based upon receipt of approvals in due course”.

There was a buzz in the industry on Thursday that the IPO may be deferred.

The Parakh & Company audit report had said that RCom had inflated its revenue by Rs2,915 crore on the stock exchanges during 2007-08.

The report also mentioned that in 2006-07 and 2007-08, the company under-reported the revenues to the regulator Trai, thereby evading licence fee and revenue charges of over Rs315 crore.

To that, Ambani said, “there has been a lot of unnecessary and wild speculation in some sections of the media on the comparison between RCom’s revenue as per Trai figures and as per RCom’s financial accounts, as commented upon by the special auditors.”

He said that “the most crucial aspect of the matter, which is conveniently being ignored, is that all these revenue figures have been reported by the company, RCom itself in its filings with the stock exchanges, DoT and Trai from quarter to quarter, over the last many years, and this is not something that has been “discovered,’ as made out by a section of the media, by the special auditors.”

Anil Ambani, who was in New Delhi on Wednesday, is learnt to have met some senior government officials. However, company representatives said that those meetings had no connection with the audit report.