SpiceJet auditors raise doubts over carrier's financial viability

Auditors of low-cost airline SpiceJet seem to have doubts about the company's ability to stay afloat as its accumulated losses have eroded its net worth.

In a limited review report to SpiceJet directors, S R Batliboi & Associates said accumulated losses of Rs1,077.81 crore as of 31 December had "substantially" eroded the company's net worth, which has raised doubts over the company's ability to continue as a "going concern".

SpiceJet, with a net worth of Rs315.83 crore as of December, had a market-cap of Rs1,108 crore. Shares in SpiceJet were at Rs24.60, down 0.40 per cent on BSE at close of trading yesterday.

The Kalanithi Maran-owned airline yesterday posted a loss ofRs39.3 crore for the three months to December as against a profit of Rs94.44 crore a year ago.

The third quarter is traditionally the strongest for airlines in India, but according to auditors the losses would have escalated had SpiceJet made a provision for interest relating to earlier years on the outstanding inter-corporate deposits which the Gurgaon-based airline had under-reported.

The auditors added SpiceJet had not accounted for the foreign exchange differences on borrowings to the extent they are regarded as an adjustment to interest costs. SpiceJet is one of three listed Indian carriers (of a total of six scheduled commercial airlines) whose health has failed to impress auditors.