With SpiceJet flying into Rs 275 crore quarterly loss, the beleaguered carrier’s auditors have raised “significant doubt” over the ‘going-concern’ viability of the company saying its overall liabilities has outstripped total assets.
The no-frills carrier, which is going through an ownership change, today reported that its net loss widened to Rs 275 crore in the three months ended December 2014. In the comparable period last year, the same stood at Rs 173 crore.
“… the company has incurred a net loss of Rs 275.02 crore during the quarter ended December 31, 2014 and as of that date, the company’s total liabilities exceed its total assets by Rs 1,635.54 crore.
“These conditions along with other matters… indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern,” the carrier’s auditor S R Batliboi & Associates LLP said.
A company is termed as a ‘going concern’ if it has sufficient resources to continue to operate indefinitely and to avoid any potential bankruptcy risks.
The observations have been made by the auditor in its limited review report, submitted to SpiceJet’s board of directors.
However, the carrier’s management said that efforts are being taken to make the company profitable and meet liabilities.
The Civil Aviation Ministry has approved the revival plan for SpiceJet that would see original promoter Ajay Singh acquiring majority stake and control in the carrier.
The plan, once implemented, would also see the outgoing promoters, Maran family, pumping in funds into the carrier.
Besides the carrier is implementing various measures such as fleet rationalisation, optimising aircraft utilisation, re-negotiation of contracts and other cost control measures.
“These measures as well as improvement iin the macroeconomic conditions for the airline industry in the markets in which the company operates, such as recent reduction in ATF prices, consistent improvement in capacity utilisation and unit revenues as well as enhancement in ancillary revenues, are expected to increase operational efficiency and profitability,” SpiceJet said in a regulatory filing.
The management expects these steps to help it raise necessary funds to achieve profitable operations and meet the liabilities.
“Accordingly, these financial results have been prepared on the basis that the company will continue as a going concern for the foreseeable future,” the filing said.
In the 2014 December quarter, the no-frills airline’s total income from operations slumped to Rs 1,311.18 crore from Rs 1,807.73 crore in the year-ago period.