JOIN US The report of the Bangalore-based auditors said: “Attention of the members is invited to note 24 of schedule 19 regarding the financial statements of the company having been prepared on a going concern basis, notwithstanding the fact that its net worth is completely eroded. The appropriateness of the said basis is inter alia dependent on the company’s ability to infuse requisite funds for meeting its obligations.”
At the end of the financial year ending March 2011, according to its balance sheet, Kingfisher had an accumulated loss of Rs 5,348.47 crore while its total income for 2010-11 was Rs 6,495.56 crore. In the quarter ending June 2011 the airline lost another Rs 263.54 crore. The auditor’s concern has also led to a crash in its share price to a historic low of 25 on Thursday.
Kingfisher Airlines, controlled by the flamboyant liquor tycoon Vijay Mallya, however, disputed any question of its survival. In a statement issued on Thursday a company spokesperson said that it was incorrect to say that Kingfisher Airlines auditors have raised serious doubts about the survival of the airline.
“In fact, the auditors’ report only draws attention of the members to the reasons for preparing the accounts under the going concern concept,” the statement said.
It also claimed that since the start of the year, long term funds amounting to over
Rs 475 crore had been infused into the company and it was also exploring capital raising either through GDR or rights issue.
But, given the debt burden, losses and very low share price (its stock has lost 60 per cent value since January this year), it is doubtful if the company will be able to raise funds through the equity route.
The auditors also drew attention to the method of accounting of costs incurred on major repairs and maintenance of engines of aircraft. According them, treating such cost of Rs 122.57 crore under fixed assets and amortised over the estimated useful life of the repairs was not “in accordance with current accounting standards.”
The company, in its statement, however, justified the treatment saying it followed the practice consistent with other major international airlines such as British Airways and Malaysian Airlines.
The auditors also mentioned certain undisputed amounts payable, including tax deducted at source of Rs 422.97 crore, and service tax of Rs 10.48 crore.
Though these amounts were outstanding for a period of more than six months from the date they became payable, the due dates for these amounts were as per respective statutes, the auditors said.
Of course, all airlines in the country are currently bleeding due to cut-throat competition leading to un-remunerative fares and rising wage and fuel cost, but Kingfisher and the state-owned Air India are in the worst situation, they stated.