High cost of operations has forced India's airline companies into deep financial trouble. After Kingfisher Airlines, SpiceJet seems to be in trouble, as the auditors have raised concerns over the airline's ability to continue as a company.
The auditors have said that the accumulated losses of the company have substantially eroded the net worth of the company. However, the airline has said that their net worth has increased in the last quarter after the promoters infused money.
"As at December 31, 2011, the company's accumulated losses of Rs 1077.81 crore (Rs 10.78 billion) has substantially eroded the net worth of the company, indicating the existence of a material uncertainty that may cast doubt about the company's ability to continue as a going concern. The company has also incurred losses of Rs 39.26 crore (Rs 393 million) during the current quarter and Rs 356.59 crore (Rs 3.57 billion) for the year till date," according to the auditor report prepared by S R Batliboi & Associates.
A company's net worth is the retained earnings, or the amount left after dividends are paid, plus the money in its capital accounts, minus all its short- and long-term debt.
According to Business Standard Research Bureau data, the net worth of the company in March 2011 was Rs 318 crore (Rs 3.18 billion), which fell to Rs 9 crore (Rs 90 million) in September 2011.
SpiceJet, which ended the last fiscal (April 10 to March 11) with a profit of Rs 101 crore (Rs 1.01 billion), made losses for the third consecutive quarter. The carrier reported a loss of Rs 39.26 crore during the quarter ended December as compared to profit Rs 94.44 crore during the same period last year.
It has reported losses of Rs 71 crore (Rs 710 million) in the first quarter and Rs 240 crore (Rs 2.4 billion) in the second quarter of the current fiscal.
But the airline claims that their net worth has increased in the third quarter of this fiscal, as the promoter has infused money.
"In the third quarter of the current fiscal, our promoter infused Rs 131 crore (Rs 1.31 billion) in the company. Even if you deduct the losses made during the quarter, we have got over Rs 90 crore. Money is not an issue for us," said SpiceJet Chief Executive Officer Neil Mills without sharing the total net worth figures.
Mills further said the company has enough money in the banks and they are paying all the bills on time and promoters can put in money whenever required. Analysts also say that the airline is comparatively better situation. "The net worth has actually improved in the last quarter due to Rs 131 crore fund infusion by the promoters offsetting the Rs 39 crore loss. The net worth problem is of relatively lesser concern than what it used to be in the past," said Mahantesh Sabarad, senior vice president, Fortune Equity Brokers (India) Ltd.
Because of high taxes on Aviation Turbine Fuel and depreciating rupee, all the three listed carriers have made losses in the current fiscal.
Jet Airways, the country's largest carrier in terms of passenger carriage, has made combined losses of Rs 937 crore (Rs 9.37 billion) in the first three quarters of the current fiscal.
Kingfisher, which has not announced its third quarter results, has made losses of Rs 731 crore in the first two quarters of the current fiscal.
