Shares of SpiceJet fell by over 11% on Monday after the low-cost airlines auditors raised concerns over the companys net worth, which has been eroded by accumulated losses.
In the companys latest annual report, SR Batliboi & Associates said, The companys operating results have been materially affected due to various factors and as on March 31, 2013, the companys accumulated losses have fully eroded the net worth of the company. The appropriateness of the going concern assumption is dependent on the companys ability to establish consistent profitable operations as well as raising adequate finance to meet its short-term and long-term obligations. SpiceJets total losses since 2007-08 amount to R970.07 crore.
The stock, which opened at R19.90 on Monday morning, fell as much as 11.25% to R18.15, closing at R18.35 at the end of the day.
The auditors added, Based on the mitigating factors discussed in the said note, the management believes that the going concern assumptions are appropriate and no adjustments have been made in the financial statements for the year ended March 31, 2013.
The auditors had issued a similar warning to the airline last year. However, post the 2011-12 warning, SpiceJet had paid off most of its working capital loans and other liabilities.
With the principal promoters of the airline, Kalanithi Maran and family, having already increased their stake by 5% this fiscal, industry sources say that the promoters could be bringing in more money through debentures and loans. The Marans have infused more than R300 crore in the airline since September 2011, on three different occasions. As of the June quarter, they held 52.14% of the airlines equity.
The SpiceJet spokesperson was not available for comment despite repeated attempts. Calls and messages to Sun Group CFO, SL Narayanan, didnt elicit any response.
In the last few years, airlines have been adversely affected by high fuel costs, high interest rates and a slowdown in passenger demand. Spice Jet posted a net profit of R50.56 crore for Q1 FY 2014, compared to a loss of R191 crore during Q4 FY 2013.
SpiceJet said in the annual report that while the industry outlook for financial year 2013-14 looks somewhat challenging, the company has increased its footprint internationally and will continue to add overseas destinations and routes. This will result in additional aircraft utilisation and secure better yields, thereby protecting domestic yields.