Thursday, December 31, 2020

GoAir auditors raise going concern doubts as net worth erodes in FY20

GoAir’s poor financial health and the ongoing Covid-19 pandemic have led the low-cost carrier’s independent auditors to cast doubts on whether it can sustain itself as a going concern.

For FY20, the Wadia Group-owned airline reported a net loss of ₹1,278.42 crore, compared to a profit of ₹123.57 crore in FY19.

According to regulatory filings, reviewed by BusinessLine, during FY20 GoAir’s operating revenues increased 11.73 per cent to ₹6,997.07 crore (₹6,262.44 crore). But its EBITDA tumbled 59.24 per cent to ₹114.38 crore (₹280.65 crore). These documents were sourced from Tofler.

However, its total expenses rose to ₹8,280 crore (₹6,559.49 crore). The company had a negative net worth of ₹1,500.98 crore, and its current liabilities exceeded its current assets by ₹3,333.53 crore.

“Such events or conditions could have indicated the existence of a material uncertainty that could have cast doubt about the company’s ability to continue as a going concern,” said the independent auditors.

However, “based on resumption of airline operations, revised business plans and other mitigating factors, the management is of the view that a going concern basis of accounting is appropriate for the preparation of the accompanying standalone financial statements,” it added.

GoAir explained that its operating and financial performance for the year got adversely affected from the end of Q3, and more so in Q4 of FY20, as there were frequent failures in engines supplied by Pratt and Whitney.

Post the Covid-led lockdown, GoAir resumed operations from June 1, 2020. “Post the Unlock, it was able to sale and lease back (SLB) three aircraft in July 2020,” the company said.

Experts said the SLB model may pose a challenge. “They have also focussed highly on sale and leaseback financing as their sole way of adding aircraft and providing for cash flows. Post Covid, with a soft funding market and lessors’ own orders, SLBs could hamper profits,” said an industry expert.

31/12/20 Forum Gandhi/Business Line

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