Reliance Infra Auditors Resign Amidst Fraud Allegations, Investigations Mount

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AuthorVihaan Mehta|Published at:
Reliance Infra Auditors Resign Amidst Fraud Allegations, Investigations Mount
Overview

Reliance Infrastructure's Q3 FY26 results are critically marred by its statutory auditors' intention to resign, citing fraud allegations and an ADT-4 filing. The company faces escalating probes from SEBI, ED, and SFIO, alongside significant "going concern" uncertainties across multiple subsidiaries. Auditors issued a disclaimer, unable to form a conclusive opinion on the financial statements, raising serious doubts about the reliability of the reported figures. While consolidated profit before tax showed a YoY improvement, the underlying governance and regulatory crisis is the dominant narrative.

📉 The Financial Deep Dive

Reliance Infrastructure Limited (RInfra) announced its Q3 FY26 unaudited results, but the figures are severely overshadowed by a corporate governance crisis and a critical auditor disclaimer. The consolidated income for the quarter declined 14.7% YoY to ₹4,362.61 crore. However, Profit Before Tax (PBT) on a consolidated basis saw a significant year-on-year improvement, turning from a loss of ₹3,194.58 crore in Q3 FY25 to a profit of ₹307.11 crore in Q3 FY26. For the nine months ended December 31, 2025, consolidated PBT stood at ₹3,140.88 crore against a loss of ₹330.79 crore in the prior period, aided by exceptional items aggregating ₹1,529.57 crore. Standalone operations, however, reported a widened loss before tax of ₹165.60 crore in Q3 FY26 (vs ₹93.24 crore YoY).

The Quality & The Grill:
The most alarming aspect is the explicit disclaimer by statutory auditors, Chaturvedi & Shah LLP. They stated they were "unable to obtain sufficient appropriate evidence to provide a basis of our conclusion" and "unable to provide our basis of our conclusion, as to whether the accompanying Statement... has not disclosed the information required... or that it contains any material misstatement." This disclaimer stems directly from severe issues including alleged fraud, ongoing regulatory investigations, and substantial "going concern" uncertainties across numerous subsidiaries, including MMOPL, GFTR, and TKTR, some of which are in CIRP or facing NCLT proceedings.

The company's audit committee disputes the auditor's reasons for resignation, deeming them incorrect. Nevertheless, the auditors' inability to form an opinion renders the reported financial figures, including EPS (consolidated Q3 FY26 at ₹0.27), highly unreliable and raises significant questions about the true financial health of the company.

🚩 Risks & Outlook

The outlook for Reliance Infrastructure is exceptionally bleak, primarily due to the severe corporate governance and regulatory red flags. The impending resignation of statutory auditors due to allegations of fraud and their inability to provide an audit opinion is a critical warning signal for investors. This is compounded by ongoing investigations from the Enforcement Directorate (ED), SEBI (for alleged fraudulent and unfair trade practices), and the Serious Fraud Investigation Office (SFIO).

Furthermore, the "going concern" uncertainties for multiple key subsidiaries signal profound operational and financial distress, potentially leading to asset impairments and liquidity crises within those entities. Despite management's assertion of confidence in meeting obligations through various sources, the pervasive uncertainties and lack of reliable financial statements make forward-looking projections highly speculative. Investors should exercise extreme caution, as the risk of significant value erosion is substantial.

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