Section A: Disclosures regarding ‘Going Concern’ in airline companies for FY 2013-14 and unaudited financial results for Q2 2014-15
Jet Airways (India) Ltd . FY 2013-14
From Auditors’ Report
Emphasis of Matter
We draw attention to the following notes to the financial statements:
(a) …. Not reproduced
(b) Note 42 regarding preparation of financial statements of the Company on going concern basis for the reasons stated therein. The appropriateness of assumption of going concern is dependent upon realisation of the synergies from alliance with the Strategic Partner and/ or the Company’s ability to raise requisite finance/ generate cash flows in future to meet its obligations, including financial support to its subsidiary.
From Notes to Financial Statements
42. The Airline Industry has been adversely affected by the general economic slowdown. This coupled with high fuel cost significantly impacted the performance and cash flows of the Company and its major subsidiary resulting in substantial erosion of the net worth. With the strategic investment by Etihad PJSC, the Management expects to improve operating cash flows through cost synergies, revenue management, network synergy, leasing out aircraft etc. These measures are expected to result in sustainable cash flows and accordingly the Financial Statements continue to be presented on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business.
Q2 2014-15
From Limited Review Report
Attention is invited to: Note no.7 of the Statement regarding preparation of the Statement on a going concern basis for the reasons stated therein. The appropriateness of assumption of going concern is dependent upon realisation of the synergies from alliance with the Strategic Partner and/or the Company’s ability to raise requisite finance/generate cash flows in future to meet its obligations, including financial support to its subsidiary.
Our report is not qualified in respect of the above matters.
From Notes to Unaudited Financial Results
7. With Strategic investment by Etihad Airways PJSC and gradual implementation of the recommendations provided by a domain expert, the Management expects to achieve required operating cash inflows through cost synergies, revenue management, network synergy, leasing out aircraft, etc. These measures coupled with on-going initiatives to raise funds are expected to result in sustainable cash flows and accordingly the statement of financial results continue to be prepared on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business.
SpiceJet Ltd . FY 2013-14
From Auditors’ Report
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2 (a) which indicates that the Company has incurred a net loss of Rs. 10,032.44 million during the year ended 31st March, 2014 and as of that date; the Company’s total liabilities exceed its total assets by Rs 10,194.76 million. These conditions, along with other matters as set forth in Note 2 (a), indicate the existence of a material uncertainty regarding the Company’s ability to continue as a going concern. Management’s plans in this regard are more fully described in the said note.
From Notes to Financial Statements
Summary of significant accounting policies
a) Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (‘Indian GAAP’). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies Act, 1956, read with General Circular 8/2014 dated 4th April, 2014, issued by the Ministry of Corporate Affairs.
The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year. The Company’s operating results continue to be materially affected by various factors, particularly high aircraft fuel costs, significant depreciation in the value of the currency, pricing pressures from competition and general economic slowdown. The Company has incurred a net loss of Rs. 10,032.44 during the year ended 31st March, 2014, and as of that date, the Company’s total liabilities exceeded its total assets by Rs.10,194.76. The Company is implementing various long-term measures to improve its product offering and enhancing customer experience. Considerable investments are also simultaneously being made by the Company to improve selling and distribution channels, revenue management and marketing functions. The Company has undertaken a comprehensive review of its current network to maximise profitability and improve efficiency in its operations. These measures along with consistent improvement in yields and enhancement in ancillary revenues are expected to drive growth in revenues in the future. The Company is also implementing various measures to optimise aircraft utilisation, improving operational efficiencies, renegotiation of contracts and other cost control measures to improve the Company’s operating results and cash flows. In addition, the Company continues to explore various options to raise finance in order to meet its short term and long term obligations. The Company believes that these measures will not only result in sustainable cash flows, but also enhance the Company’s plans for expansion.
The promoters continue to be committed to providing the required operational and financial support to Company in the foreseeable future. During the year, the Promoter has converted 15,000,000 warrants into equity shares of the Company thereby infusing additional funds of Rs. 407.03 into the Company.
Further, the Company’s promoters have subscribed to 64,169,000 warrants (convertible into equivalent no. of equity shares) for which 25% upfront money amounting to Rs. 333.04 has been received in the current year. In addition to the above, the Company has availed of an unsecured loan of Rs. 750.00 from the promoter, as well as an amount of Rs. 250.00 which has been provided as an advance against the remaining subscription money to be received consequent to the conversion of the warrants issued during the year. The Company also believes that the amendment to FDI policy has improved the investor sentiment towards the Indian aviation industry as evidenced by entry of large international players into the Indian market. In view of the foregoing, the Company’s financial statements have been prepared on a going concern basis, whereby the realisation of assets and discharge of liabilities are expected to occur in the normal course of business.
Q2 2014-15
From Limited Review Report
A1. Without qualifying our conclusion, we draw attention to Note 7 of the Statement which indicate that the Company has incurred a net loss of Rs. 1,044.6 lakh during the quarter ended 30th September, 2014, and as of that date, the Company’s total liabilities exceed its total assets by Rs. 145,973.0 lakh. These conditions, along with other matters as set forth in Note 7, indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.
From Notes to Unaudited Financial Results
7 (a) The Company has incurred losses of Rs. 31,044.7 lakhs for the quarter ended 30th September, 2014, and has accumulated losses of Rs. 295,829.8 lakh as at that date against shareholder’s funds of Rs. 149,856.7 lakh. As of this date, the Company’s total liabilities exceeded its total assets by Rs. 145,973.1 lakh. The Company’s operating results continue to be materially affected by various factors, particularly high aircraft fuel costs, significant depreciation in the value of the currency, pricing pressures from competition and general economic slowdown. The Company continues to implement various measures to improve its product offering and enhancing customer experience, along with simultaneous investments to improve selling and distribution channels, revenue management and marketing functions. The Company has also terminated certain aircraft leases ahead of schedule in the current and previous quarters in order to rationalise its fleet size and capacity in the near term while it implements its turnaround plan. These measures, along with consistent improvement in aircraft loads and RASK, as well as enhancement in ancillary revenues, are expected to drive growth in revenues in the future. The Company also continues to implement various measures to optimise aircraft utilisation, redeployment of capacity in key focus markets, improving operational efficiencies, renegotiation of contracts and other cost control measures to improve its operating results and cash flows. In addition, the Company continues to explore various options, both operating and strategic to raise financing in order to meet its short term and long term obligations. The Company believes that these measures will not only result in sustainable cash flows, but also enhance its plans for expansion in the future.
7 (b) On account of its operational and financial position, the Company has delayed payments to various parties, including vendors and its dues to statutory authorities. The Company has accrued for any known and determinable amounts of interest on such delays in accordance with contractual terms/applicable laws and regulations. However, it is not practically possible to determine the amount of any other dues, including penalties, consequent to such delays or other non-compliances of contracts or laws and regulations. Further, in view of the proposed plans of management to continue the Company as a going concern as discussed in Note 7(a) above, management is confident that it will be able to negotiate settlements with parties to whom monies are owed, to avoid any penalties. In view of the foregoing, no amounts of penalties have been recorded in these financial results.
