Mumbai, May 24 (IANS) A day after Jet Airways' auditors red-flagged its future plans on cost reduction and fund mobilisation to avert "uncertainties" created by a sudden announcement of a net loss, the company's stocks crashed by over 7 per cent.
The plunge in Jet's scrip comes after the auditors expressed their doubt over the appropriateness of preparing the company's financial results "on a going concern basis".
For the uninitiated a "going concern basis" is an accounting term which basically refers to a firm's ability to generate enough financial resources to stay in business or avoid bankruptcy.
"The appropriateness of assumption of going concern is dependent upon realisation of the various initiatives undertaken by the company and or the company's ability to raise requisite finance or generate cash flows in future to meet its obligations, including financial support to its subsidiary companies," Jet Airways' auditors had said.
"Our opinion is not modified in respect of this matter."
The 'Notes to the Accounts' had stated that: "... the statement of financial results continues to be prepared on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business including financial support to its subsidiaries."
When contacted a Jet Airways' spokesperson told IANS: "Point 13 note has been part of the 'Notes to the Accounts' for the last many years."
In addition, the spokesperson denied concerns that the dismal financial performance and auditors' concerns might lead to the firms' strategic partner, Etihad Airways, withdrawing its 'Bank Guarantee' extended for various loans and working capital for Jet Airways.
"The information is completely baseless and untrue," the spokesperson said.
The Indian passenger carrier's denial came after sources revealed that Etihad Airways might consider withdrawing its Rs 3,000 crore 'Bank Guarantee' for various loans and working capital of Jet Airways.
A query sent to Etihad did not elicit a response. Currently, Etihad Airways owns a 24 per cent stake in Jet Airways.
However, investors were not convinced and dumped the stock.
On Thursday, Jet's stocks on the BSE plunged by 7.03 per cent or Rs 29.60 to Rs 391.55 per share from its previous close of Rs 421.15 per share.
The airline's scrip had declined by over 10 per cent during the intra-day to Rs 376.60 per share.
On Wednesday, the company reported a standalaone net loss of Rs 1,036 crore for the fourth quarter of 2017-18 from a net profit of Rs 602.42 crore reported for the corresponding period of 2016-17.
In terms of financial year, Jet Airways reported a standalone net loss of Rs 767.62 crore from a net profit of Rs 1,482.52 crore reported for the previous fiscal.
On a consolidated basis, the aviation major reported a net loss of Rs 636.45 crore in 2017-18 from a net profit of Rs 1,498.68 crore in 2016-17.
Jet blamed its weak financial performance on the rise in Brent fuel without a corresponding increase in air fares, as well as mark-to-market adjustments due to a depreciating rupee.
The airline had said that despite the challenges imposed by the macroeconomic environment, "Jet Airways is on track to deliver a more resilient enterprise on the back of certain key initiatives... lowering cost of sales, increasing productivity, and fuel savings driven by the fuel efficient B737 MAX aircraft."
