Mumbai, Sept. 30: Shares of SpiceJet today sank more than 10 per cent after auditors raised concerns over the airline’s net worth.
On the BSE, the SpiceJet share slid 10.27 per cent to Rs 18.35.
S.R. Batliboi & Associates, the company’s auditors, said in SpiceJet’s annual report for 2012-13 the accumulated losses as of March 31 had fully eroded the firm’s net worth.
The auditors reiterated this observation in the first quarter ended June 30. In both the occasions, they pointed out that the appropriateness of the going concern assumption was dependent on the company’s ability to establish consistent profitable operations as well as raise adequate finance to meet its short-term and long-term obligations.
In accounting terminology, a going concern means companies that are able to function without any threat of liquidation in the foreseeable future.
This is not the first time that an auditor is raising concerns about whether an airline will continue as a “going concern”. In the past, auditors of Kingfisher Airlines and Jet Airways have raised similar questions.
As of March 31, SpiceJet suffered losses of Rs 191 crore, lower than the loss of Rs 606 crore in the previous year.
At that time, the company had said it was successful in bringing down the net losses owing to an increase in operating revenue, though the weakness of the rupee and fuel prices could not be passed on to the customers fully because of increased pricing pressure and competition.
However, for the first quarter of this year, there was a turnaround in performance with SpiceJet posting a net profit of around Rs 51 crore.
Airlines in the country have been passing through a difficult phase over the past few years because of high fuel costs and a slowdown in domestic air travel.
This year, SpiceJet will add seven Boeing 737NGs and majority of this capacity increase will be deployed in the international markets for which it has secured rights for these planned additions.
The company has admitted that while the industry outlook for this fiscal is challenging, it has increased its global footprint and will add international destinations and routes.