Shares in Reliance Capital Ltd closed 6% lower on Wednesday after the non-banking finance company (NBFC) said its auditor had resigned, sparking worries about the financial health of another player in India's troubled shadow banking sector.
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 "satisfactory response" to its queries on certain observations in its assessment, Reliance Capital said in a statement late Tuesday.
Reliance Capital refuted PwC's claims and said it had duly responded to various queries of the auditor.
The resignation of auditors from one of the biggest private NBFCs in India comes at a time when bankers and investors have raised concerns of a deeper malaise in the country's shadow banking sector after shares at private home mortgage lender Dewan Housing Finance Ltd tanked last week following a sharp ratings downgrade.
The DHFL crisis followed the fall of one of the leading private NBFCs Infrastructure Leasing and Financial Services Ltd in September which roiled the markets and spooked investors.
Reliance Capital said PwC accused it of not convening an audit committee meeting despite repeated letters and instead said it might initiate legal action against the audit firm.
PwC also warned its observations could have material impact on the company's financial statement if not resolved satisfactorily and that Reliance had prevented it from performing its duties and impaired its independent judgement.
Asked to comment on Reliance Capital's statement, PwC said it would not discuss client matters.
Reliance Capital is an NBFC owned by Anil Ambani, a business tycoon who has struggled with burgeoning debt in many of his group companies lately.