SpiceJet on the brink of financial collapse: auditor
30 September 2013
Could budget carrier SpiceJet go the failed Kingfisher Airlines way? This has become a distinct possibility as its own auditors have said that its accumulated losses as on 31 March have completely eroded its net worth.
In its latest annual report, the airline's auditors S R Batliboi & Associates LLP said, "The appropriateness of the going concern assumption is dependent on the company's ability to establish consistent profitable operations as well as raising adequate finance to meet its short-term and long-term obligations."
Neither the airline nor its auditors specified the quantum of the losses.
In response to the audit report, SpiceJet said its losses are 50 per cent higher than its net worth. The airline posted a net loss of Rs192 crore for the year ended 31 March, down from Rs605.8 crore a year earlier.
SpiceJet is the third airline in India to be flagged by its auditors, after liquor baron Vijay Mallya's virtually defunct Kingfisher Airlines and the more successful Jet Airways, whose auditors have raised concerns about its financial stability.
India's air carriers have been among the worst sufferers of the failure of India's growth story, with a slowdown in domestic air travel demand adding to high fuel costs (abetted by excessive taxation) and higher borrowing rates.
"The company's operating results has been materially affected due to various factors and as at March 31, 2013, the company's has fully eroded the net worth of the company," the SpiceJet auditors noted in their annual report.
SpiceJet faced a sharp hike in its operating cost in FY 2012-13 as rupee depreciation increased its maintenance costs and fuel bills. Total operating expenses for FY 13 increased by 30 per cent to Rs48,105 million from Rs37,079 million in FY 12.
In the annual report the auditors said, "The appropriateness of the going concern assumption is dependent on the company's ability to establish consistent profitable operations as well as raising adequate finance to meet its short term and long term obligations."