Vistara’s losses have zoomed over the last 5 years

Vistara’s mounting liabilities and poor financial health continue to remain a concern for experts. Between FY16 and FY20, the company’s total liabilities have jumped 2284.49 per cent and total losses have widened by 352.32 per cent.

A review of the company’s financials over the past five years by BusinessLine shows that the company’s losses have zoomed to ₹1,813.38 crore in FY20 compared to ₹400.90 crore in FY16. Its revenue from operations increased by 585.37 per cent by the end of FY20. However, expenses too shot up by 497.46 per cent between FY16 and FY20.

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Koushik Jagathalaprathaban, Partner, AT-TV, a consultancy firm, said the spread between the cost of delivery (measured as cost per available seat kilometre) for Vistara and its competitors is as high as 30 per cent. “This in any situation is unsustainable let alone where a product is viewed as a commodity. Some immediate measures which it can focus on are fleet standardisation, engineering cost rationalisation, revenue distribution costs,” for the company.

Exploring avenues

In response to BusinessLine ’s query, a Vistara spokesperson explained that the company is working towards a leaner cost structure while exploring newer avenues to supplement its earnings.

Vistara’s non-current and current liabilities shot up by 3,826.77 per cent and 992.60 per cent, respectively. The company’s cash and cash equivalent as at March 31, 2020 was ₹700.96 crore compared to March 31, 2016 was ₹149.17 crore.

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As its liabilities and have increased, and it has accumulated losses, Vistara’s net worth, and EBIDTA for FY20, too, have decreased to ₹842.05 crore and -₹920.39 crore.

Return on equity

Financial reports assessed by business intelligence platform Tofler stated that Vistara’s return on equity is -215.35 per cent for the fiscal.

This, according to experts, is a major matter of concern for the company, said Jagathalaprathaban. According to him, the balance sheet indicates that business has been losing money consistently while consuming enormous amounts of capital.

In FY20, the Tatas had infused ₹1,500 crore. “There have been at least two or three rounds of equity infusion by the promoters, this clearly indicates that the original business plan was flawed,” he explained.

“We remain committed to staying the course on our long-term vision and growth strategy of densifying our domestic network while expanding globally,” Vistara said.

In FY19-20, Vistara nearly doubled fleet size and grew the network by close to 50 per cent.

“While all these are significant investments, the operational expenses, however, remained high throughout the year, including the increasing price of ATF and depreciating rupee against US dollar,” the spokesperson said.

Capital infusion

Earlier last month, Tata Sons infused ₹585 crore capital for FY21 through the purchase of shares in a rights issue. The total investment in the first seven months of FY21 is now ₹1,835 crore.

In its FY20 financial results, Vistara said the company has got its business plan approved from the shareholders which will fulfil the company’s financial requirement over the next two to three years.

Covid impact

The spokesperson said that its plans for the coming few fiscals were derailed because of the pandemic. Despite this, “in the current pandemic, we see opportunities for Indian carriers that can operate long-haul direct flights, and therefore we have continued our plans to take delivery of our B787 and A321neo aircraft.”

Aviation expert Vipul Saxena said he was cautiously optimistic that if the fleet is expanded and routes are added gradually, looking at the current revenue recovery rate, the airline can bounce back to profitability soon.

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