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The independent auditors of Tata Sons have expressed concern over AirAsia India’s ability to sustain as a going concern. This comes even as Tata Sons has given a letter of intent to AirAsia stating that it would make commercially reasonable endeavours, including infusion of additional capital, for this fiscal. In FY21, AirAsia made losses to the tune of ₹1,532 crore.
The auditors, in their notes, said, “Air Asia (India) Limited, a subsidiary company, has accumulated losses and its net worth has been fully eroded, and its current liabilities exceed its current assets as at the balance sheet date by ₹2,108.99 crore.”
Covid-19 impact
The auditors further said the impact of Covid-19 on the business and operations of Air Asia (India) Limited was an added burden on the company. “These conditions and events indicate the existence of material uncertainty that may cast significant doubt on Air Asia (India) Limited’s ability to continue as a going concern.” The auditors had made similar observations last year also.
Tata Sons had acquired an additional stake of 32.67 per cent in AirAsia India Limited, increasing its ownership to 83.67 per cent, after its Malaysian joint venture partner declined to pump in more equity.
As of March 31, 2021, the subsidiary company accumulated losses of ₹3,680.34 crore against a share capital of ₹1,500 crore.
Management initiatives
While flagging the hurdles in the way of AirAsia, the independent auditors noted that 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.
It further added: “The management constantly monitors its cash flow requirements to ensure it settles its liabilities in the normal course of business, including servicing its obligations under loan arrangements, on a timely basis. Also, the audited financial statements describe the continued impact of Covid-19 on the business and operations of the subsidiary company and management’s assessment and actions implemented.”
The auditors drew attention to the fact that AirAsia India has receivedletter from its holding company (Tata Sons) that they would make commercially 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 up to next 12 months from the date of balance sheet.
The assurance has made the management confident that AirAsia would continue to generate cash flows from its operations and receive operational and financial support from its holding company to fund its operating and capital expenditure requirements for the foreseeable future.
Tata group’s other joint venture airlines company with Singapore Airlines, Tata SIA, also known as Vistara, too made a loss of ₹1,611 crore.
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