Shareholders offer ‘endeavours to meet financial liabilities’ of AirAsia India

Forum Gandhi Mumbai | Updated on August 31, 2020

Infusion of additional capital in airline among options

AirAsia India has received letters from its shareholders that they would make endeavours, including infusion of additional capital, if required, to assist in meeting the airline’s financial liabilities at least up to March 2021.

The airline now operates as a subsidiary of Tata Sons instead of being a joint venture. Tata Sons owns a 51 per cent stake in the cash-strapped airline while the balance is held by Malaysia’s AirAsia Bhd.

While there have been reports that the Malaysian partner may exit the venture, Tata Sons’ auditor has said in the company’s annual report for FY20, “The subsidiary company has received letters from its shareholders that they would make reasonable endeavours, including infusion of additional capital, if required, in accordance with the approval of their Board of Directors, to assist in meeting its financial liabilities for the period at least up to next 12 months from the date of balance sheet. In view of the foregoing, management is confident that the company would continue to generate cash flows from its operations and receive operational and financial support from its shareholders to fund its operating and capital expenditure requirements for the foreseeable future.”

Therefore, the airline is being treated as going concern which contemplates realisation of assets and settlement of liabilities in the normal course of business.

As of March 31, 2020, Air Asia had accumulated losses of ₹2,149.77 crore, against a share capital of ₹1,500 crore. As of that date, its current liabilities exceeded its current assets by ₹1,208.89 crore. “These conditions along with other matters indicate existence of material uncertainties that may cast significant doubt on the company's ability to continue as a going concern. The management continues to undertake various initiatives to improve its operating cost structure and operational efficiency to achieve profitability, including negotiation with lessors/vendors for improved commercial terms and better credit facilities,” the auditor said.

Published on August 31, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like