1 April 2019: Lenders to Jet Airways have zeroed in on Ernst & Young as the new auditor of the troubled airlines. The interim management committee, which is being formed, will formally appoint the E&Y, people familiar with the matter said.
E&Y won the race while Deloitte was close contender.
State Bank of India, which is the leader of the lenders’ consortium, had in December asked E&Y to carry out forensic audit of the airlines books for the period between April 2014 and March 2018.
BSR & Co, an affiliate of KPMG India, and DTS & Associates were Jet’s auditor and they signed the third quarter result with a strong note regarding preparation of financial results on going concern basis.
“The company has incurred a loss of Rs 3,208 crore during the nine months ended December 31 2018 and current liabilities exceeds its current assets by Rs 9,610 crore. These events or conditions, among others indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern,” the auditors had said.
SBI and other banks have over Rs 8,000-crore loan exposure to the private airlines.
“Now, the typical audit issues for Jet Airways would be the valuation of long term assets and goodwill , valuation of financial instruments, revenue recognition matters, impairment of intangible & tangible assets among others,” said Arijit Chakraborty, an independent chartered accountant.
Banks are in the process of converting their debt into equity will have 50.1% holding in the airlines as part of its restructuring and prevent it from being grounded. The stake issued to the banks will be valued at Re 1 on their books. Jet has about 11.5 crore equity shares while a similar number of shares will be floated in favour of the lenders. Accordingly, promoter Goyal’s 51% holding will come down to half while Etihad’s 24% will become 12%.
“We wanted take this route as moving to bankruptcy and NCLT court would have taken a long time,” SBI managing director Arijit Basu said.
The airlines is operating 35 aircraft at present while it had a fleet of 119 aircraft before the fund-crisis.