Kingfisher Airlines has slid 4% on the Bombay Stock Exchange at Rs 24.55 following an audit firm BK Ramadhyani & Co raising doubts over the company’s ability to stay in business for long in the annual general report of the company.
Here are a few observations made by the audit firm
Kingfisher has defaulted repayment on loans taken from banks and institutions.
The airline has not deposited with the government money it collected from employees as tax deducted at source and provident fund contribution, painting a dire picture of the airline's finances.
Kingfisher's ability to remain a ‘going concern’ will depend on its promoters bringing in money into the company.
These observations have unsettled investors who are already wary of the stock as is evident from the heavy sell-off in the stock after the report being posted on the BSE. Kingfisher has underperformed the market in past one quarter, falling 37.38% as against 8.80% decline in the Sensex.
Alongside, even the sagging financials of the airline are a bigger concern for the airline which has never posted profits since its inception in 2005.This is why analysts remain cautious on the stock. Sunil Jain, vice president-equity research at Nirmal Bang believes one should stay away from Kingfisher shares considering the current financial status of the airline.
The airline’s debt currently stands at Rs 6,000 crore and it posted higher Y-o-Y losses at Rs 263.54 crore from Rs 187.34 crore in the year-ago period owing to high fuel costs. Revenues moved up by around 19% to Rs 1881.64 crore.
Even as analysts remain doubtful on seeing the airline turn-around in the short term, the airline is looking at various ways to improve its balance sheet.
For instance, it re-structured its debt of around Rs 8000 crore to bring down its interest burden. Last month its board approved a rights issue of shares to raise up to Rs 20 billion, but the time frame is not yet decided by the airline.