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28
May 2018
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jet airways (The Total Investment & Insurance Solutions)
Ratings agency ICRA downgraded the
Airline major Jet Airways' credit rankings to junk status on the back of a net
loss reported for 2017-18.
The
airline's long term rating assigned to "Long term Loans" and
"Non-Convertible Debentures" was revised to lCRA BB+ (negative
outlook) from ICRA BBB- (negative outlook). The Total Investment & Insurance Solutions
BB+
Rating is just below the investment grade rating of BBB-. It is considered as
highest junk rating. The Total
Investment & Insurance Solutions
According
to a BSE filing made on Monday, the company said that ICRA has revised its
short term rating to "ICRA A4+" from "ICRA A3".
"The
downward revision considers weakened financial performance of the company,
primarily arising out of increased jet fuel prices which could not be passed on
to the customers due to weak pricing power caused by excess competition,"
the filing said. The Total Investment
& Insurance Solutions
ICRA
in its statement on Monday said: "ICRA has downgraded the long-term rating
assigned to the Rs 698.9-crore non-convertible debenture programme, the Rs
3,574.7-crore long-term loans, the Rs 645.0-crore long-term, fund-based
facilities and the Rs 600.0-crore long-term,
non-fund based facilities of Jet Airways (India) Limited to [ICRA]BB+ from [ICRA]BBB-." The Total Investment & Insurance Solutions
non-fund based facilities of Jet Airways (India) Limited to [ICRA]BB+ from [ICRA]BBB-." The Total Investment & Insurance Solutions
"ICRA
has also downgraded the short-term rating assigned to the Rs 3,950-crore
short-term, non-fund based facilities of Jet Airways to [ICRA]A4+ from
[ICRA]A3. The outlook on the long-term rating is negative," the statement
added.
The
downward revision comes after the company' auditors on May 23 red-flagged its
future plans on cost reduction and fund mobilisation to avert
"uncertainties" created by a sudden announcement of a net loss.
ICRA
said the ratings downgrade considers the weakened operating and financial
performance of the company because of its inability to pass on the increase in
jet fuel prices to the customers. The
Total Investment & Insurance Solutions
"The
company has large debt repayments due over FY2019 (Rs 3,120.3 crore), FY2020
(Rs 2,444.5 crore) and FY2021 (Rs 2,167.9 crore). The company is undertaking
various liquidity initiatives, and the timely implementation of these
initiatives is a key rating sensitivity. The airline industry also continues to
face headwinds of rising fuel costs and weak pricing power due to excess
competition," it added. The Total
Investment & Insurance Solutions
ICRA
believes that the credit profile of Jet Airways will continue to remain
stretched in the medium term until the domestic airlines industry is able to
pass on the increase in jet fuel prices to the customers through an increase in
fares.
"The
outlook may be revised to stable if the company is able to significantly
improve its profit margins through a proportionate increase in yields or a
significant reduction in its CASK. Any major liquidity initiative undertaken by
the company is also a positive for the ratings," ICRA added.
The
Jet Airways auditors expressed their doubt over the appropriateness of
preparing the company's financial results "on a going concern basis".
For
the uninitiated a "going concern basis" is an accounting term which
basically refers to a firm's ability to generate enough financial resources to
stay in business or avoid bankruptcy. The
Total Investment & Insurance Solutions
"The
appropriateness of assumption of going concern is dependent upon realisation of
the various initiatives undertaken by the company and or the company's ability
to raise requisite finance or generate cash flows in future to meet its
obligations, including financial support to its subsidiary companies," Jet
Airways' auditors had said. The Total
Investment & Insurance Solutions
"Our
opinion is not modified in respect of this matter."
On
last Wednesday, the company reported a standalaone net loss of Rs 1,036 crore
for the fourth quarter of 2017-18 from a net profit of Rs 602.42 crore reported
for the corresponding period of 2016-17.
In
terms of financial year, Jet Airways reported a standalone net loss of Rs
767.62 crore from a net profit of Rs 1,482.52 crore reported for the previous
fiscal.
On a
consolidated basis, the aviation major reported a net loss of Rs 636.45 crore
in 2017-18 from a net profit of Rs 1,498.68 crore in 2016-17.
Jet
Airways shares were trading at Rs 436.50 per share at the BSE, up 7.80 per cent
at 3.16 pm on Monday.The Total
Investment & Insurance Solutions
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