Indian LCC SpiceJet remains optimistic it can secure enough additional capital to continue its recovery, although the company’s auditors warn the carrier is in fragile financial condition.
While reporting improved financial results for the June quarter, SpiceJet said it is in the process of raising new equity from its major backers and is considering doing the same with institutional investors. These funds would be used partly for maintaining its parked aircraft and preparing them for a return to service, which would help boost revenue.
SpiceJet is also seeking shareholder approval to issue shares to one of its large lessors to settle outstanding dues. Some of its lessors have applied to reclaim aircraft from SpiceJet or sought to launch bankruptcy proceedings.
Based on the equity-raising actions, their effect on business plans and cashflow projections, SpiceJet said it is “of the view that the group will be able to achieve profitable operations and raise funds as necessary, in order to meet its liabilities as they fall due.”
The company’s auditors, however, noted that despite a profitable June quarter, SpiceJet’s accumulated losses have “resulted in a complete erosion of its net worth.” The carrier’s liabilities exceed its current assets by a large margin, the auditor said in its report accompanying SpiceJet’s earnings disclosure.
Such factors “cast significant doubt about the company’s ability to continue as a going concern,” the auditor said. It did not change its opinion based on management’s comments about efforts to secure more funding.
The company’s auditor has previously issued similar warnings about SpiceJet’s tenuous financial condition.
SpiceJet reported an INR2 billion ($24.6 million) net profit for the quarter through June 30, which represents the company’s fiscal 2023-2024 first quarter.
The carrier also achieved a net profit of INR107.4 million for the previous three months, its fiscal 2022-2023 fourth quarter. The carrier reported INR15 billion net loss for its fiscal 2022-2023, which ended March 31.
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