KF deflates Q3 loss figure via accounting jugglery
6 Feb 2013 5:31 AM IST
Auditors of debt-ridden Kingfisher Airlines on Tuesday said that the carrier's third-quarter net loss would have been much higher at Rs 1,090 crore, had it followed 'generally accepted accounting standards' in realisation of aircraft-related costs, taxation and loans.
For the third quarter ended 31 December 2012, Kingfisher on Tuesday reported a net loss of Rs 755.17 crore, a sharp increase of 70 per cent from Rs 444.26 crore in the year-ago quarter.
The grounded airline did not report any revenue for the quarter, as against Rs 1,367.71 crore in the third quarter of previous fiscal.
Kingfisher Airlines, part of liquor baron Vijay Mallya-led UB Group, had last posted a quarterly profit in October- December period of 2006 (Rs 9.6 crore), while it has never posted a profit on full-year basis.
In their 'limited review report' for its third quarter results, the auditors said the losses would have been Rs 1,090.34 crore had the company used generally accepted accounting standards.
The auditors, B K Ramadhyani & Co, said in its report that the accounting method used by the airline to calculate costs incurred for maintenance and repairs of aircraft was 'not in accordance with generally accepted accounting standards prevalent in India.'
Besides, the company's reserves as on 31 March 2012, would have been a debit of Rs 1,046 crore as against the reported figure of debit of Rs 6,213.14 crore, auditors said.
They have also drawn attention to Kingfisher's financial statements being prepared on a 'going concern' basis, notwithstanding the fact that the company's net worth is eroded.
'The appropriateness of the said basis is inter-alia dependent on the company's ability to obtain renewal of the scheduled air operator's permit by the DGCA, infuse requisite funds for meeting its obligations, rescheduling of debt, other liabilities and resuming normal operations,' the auditors said.
'During the quarter under review, Kingfisher did not have any operations. The company submitted a revival plan to the DGCA for renewal of its scheduled operator's permit and for restart of operations,' the company said in a stock exchange filing.
'Kingfisher has made significant progress in complying with the DGCA requirement,' the airline added.
Kingfisher, which has debt of nearly Rs 8,000 crore and accumulated loss and liabilities of a similar amount, has been grounded since 1 October after its pilots and engineers went on a strike over non-payment of salaries.
'Estimates of number of unflown tickets and their average value, based on which management has reportedly estimated the amount of unearned revenue, not being drawn from accounting records, could not be reviewed by us,' the review report said.
SEBI CLEARS DIAGEO’S OPEN OFFER FOR UNITED SPIRITS
Moving closer to complete its Rs 11,167 crore takeover of majority stake in United Spirits, global liquor giant Diageo Plc has got market regulator Sebi's (Securities and Exchange Board of India) clearance for an open offer to acquire 26 per cent stake from public shareholders of the UB group firm.
As part of the deal for purchase of 53.4 per cent stake in Vijay Mallya-led UB group's United Spirits Ltd, Diageo has made a Rs 5,441 crore open offer for purchase of 26 per cent stake in the company from non-promoter shareholders.
The open offer, which was made about three months ago soon after the deal announcement on 9 November, has been now cleared by Sebi (Securities and Exchange Board of India) after numerous clarifications sought by the regulator and the subsequent representations made to it in this regard.
The deal is, however, still awaiting a green signal from fair trade regulator CCI (Competition Commission of India), although the concerned parties (Diageo and UB group firms) have submitted certain clarifications sought from them.
Sebi issued its final observations on the open offer, which are necessary for the offer and the deal as a whole to go through, on 31 January 2013 and the same have been communicated to Diageo, United Spirits and the merchant banker JM Financial, a senior official said.
The regulator was earlier not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares, as it feared that the minority shareholders might be at disadvantageous position under the existing terms of the deal.
However, some changes have been made to the satisfaction on the regulator as well as the companies to clear the deal.
As part of the deal, Diageo would acquire 27.4 per cent stake for Rs 5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. In addition, it had offered to acquire an additional 26 per cent stake for Rs 5,441.07 crore through an open offer for public shareholders.
Any acquisition of 25 per cent or more stake in a listed company triggers a mandatory open offer for purchase of additional 26 per cent stake from the public shareholders and the same needs to be cleared by the market regulator.
For the third quarter ended 31 December 2012, Kingfisher on Tuesday reported a net loss of Rs 755.17 crore, a sharp increase of 70 per cent from Rs 444.26 crore in the year-ago quarter.
The grounded airline did not report any revenue for the quarter, as against Rs 1,367.71 crore in the third quarter of previous fiscal.
Kingfisher Airlines, part of liquor baron Vijay Mallya-led UB Group, had last posted a quarterly profit in October- December period of 2006 (Rs 9.6 crore), while it has never posted a profit on full-year basis.
In their 'limited review report' for its third quarter results, the auditors said the losses would have been Rs 1,090.34 crore had the company used generally accepted accounting standards.
The auditors, B K Ramadhyani & Co, said in its report that the accounting method used by the airline to calculate costs incurred for maintenance and repairs of aircraft was 'not in accordance with generally accepted accounting standards prevalent in India.'
Besides, the company's reserves as on 31 March 2012, would have been a debit of Rs 1,046 crore as against the reported figure of debit of Rs 6,213.14 crore, auditors said.
They have also drawn attention to Kingfisher's financial statements being prepared on a 'going concern' basis, notwithstanding the fact that the company's net worth is eroded.
'The appropriateness of the said basis is inter-alia dependent on the company's ability to obtain renewal of the scheduled air operator's permit by the DGCA, infuse requisite funds for meeting its obligations, rescheduling of debt, other liabilities and resuming normal operations,' the auditors said.
'During the quarter under review, Kingfisher did not have any operations. The company submitted a revival plan to the DGCA for renewal of its scheduled operator's permit and for restart of operations,' the company said in a stock exchange filing.
'Kingfisher has made significant progress in complying with the DGCA requirement,' the airline added.
Kingfisher, which has debt of nearly Rs 8,000 crore and accumulated loss and liabilities of a similar amount, has been grounded since 1 October after its pilots and engineers went on a strike over non-payment of salaries.
'Estimates of number of unflown tickets and their average value, based on which management has reportedly estimated the amount of unearned revenue, not being drawn from accounting records, could not be reviewed by us,' the review report said.
SEBI CLEARS DIAGEO’S OPEN OFFER FOR UNITED SPIRITS
Moving closer to complete its Rs 11,167 crore takeover of majority stake in United Spirits, global liquor giant Diageo Plc has got market regulator Sebi's (Securities and Exchange Board of India) clearance for an open offer to acquire 26 per cent stake from public shareholders of the UB group firm.
As part of the deal for purchase of 53.4 per cent stake in Vijay Mallya-led UB group's United Spirits Ltd, Diageo has made a Rs 5,441 crore open offer for purchase of 26 per cent stake in the company from non-promoter shareholders.
The open offer, which was made about three months ago soon after the deal announcement on 9 November, has been now cleared by Sebi (Securities and Exchange Board of India) after numerous clarifications sought by the regulator and the subsequent representations made to it in this regard.
The deal is, however, still awaiting a green signal from fair trade regulator CCI (Competition Commission of India), although the concerned parties (Diageo and UB group firms) have submitted certain clarifications sought from them.
Sebi issued its final observations on the open offer, which are necessary for the offer and the deal as a whole to go through, on 31 January 2013 and the same have been communicated to Diageo, United Spirits and the merchant banker JM Financial, a senior official said.
The regulator was earlier not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares, as it feared that the minority shareholders might be at disadvantageous position under the existing terms of the deal.
However, some changes have been made to the satisfaction on the regulator as well as the companies to clear the deal.
As part of the deal, Diageo would acquire 27.4 per cent stake for Rs 5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. In addition, it had offered to acquire an additional 26 per cent stake for Rs 5,441.07 crore through an open offer for public shareholders.
Any acquisition of 25 per cent or more stake in a listed company triggers a mandatory open offer for purchase of additional 26 per cent stake from the public shareholders and the same needs to be cleared by the market regulator.
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