Spicejet

Financial Statement Analysis:

SpiceJet is India’s second-largest airline in terms of domestic passenger volume and the
largest in terms of regional connectivity. They are driven by the vision of making flying
accessible and enjoyable to all. They are doing this by consistently adding more destinations,
expanding our fleet and employing better technologies and passenger-friendly people to
deliver impeccable customer service. Our operational excellence is enabling us to deliver
sustained on-time performance and achieve passenger load factor of over 90% for a
continuous 48 months in a row.

Financial Performance:

Indian economy continues to remain one of the fastest-growing major economies in the
world, despite a slight moderation in its Gross Domestic Product (GDP) growth from 7.2%
in FY 2017-18 to 6.8% in FY 2018-19. The slowdown was primarily led by subdued
consumption and investment, agricultural distress and tight liquidity conditions triggered
by non-banking finance crisis. Nonetheless, Indias ranking in the World Banks Ease of
Doing Business Report 2018 improved by 23 notches to 77th position. This can be
attributed to the solid macro-economic fundamentals and bold reformative policy measures
implemented by the Government in recent years. Initiatives of
Goods and Services Tax (GST), Insolvency and Bankruptcy framework, liberalisation of
Foreign Direct Investment
(FDI) norms, and ease of doing business, among others have brought in renewed vigour
within the economy.
The Insolvency and Bankruptcy Code (IBC) is progressing well towards resolution of
stressed assets of both corporates and banks. The teething issues relating to GST
implementation is also steadily settling down. With key economic reforms on track, the
Government is likely to focus on their faster implementation, with greater emphasis on
incentivising private investment and boosting consumption. The Union Budget 2019-20
laid the foundation for a New India and reflected the Governments endeavour towards
making India a USD 5 trillion economy by 2024.
Important steps taken towards building physical and social infrastructure, uplifting rural
economy, strengthening manufacturing and improving liquidity conditions will put the
economy on a high growth trajectory.
 The Company’s performance during the year ended March 31, 2019 compared to the
previous financial year has been increased in terms of their total revenue from
78,352.09 million to 91,715.44 million, registering growth of 17.06% is found. This
financial year saw a 25% increase in aviation turbine fuel prices and 9% depreciation
of the Indian Rupee that resulted in cost escalations and the Company reported
standalone net loss of 3,160.83 million.Revenue from operations increased by 18% to
` 91,133 million in FY 2018-19 from ` 77,557 million in FY 2017-18. Other income
reduced by 27% to 583 million in FY 2018-19 from 795 million in FY 2017-18.
 Total expenses for FY 2018-19 increased by 30% to 91,231 million from 69,982
million in FY 2017-18.
(i) Aircraft Fuel and Oil:Expenditure on aircraft fuel increased by 42% to 34,453
million in FY 2018-19 from 24,326 million in FY 2017-18. The increase on account
of increase in capacity deployed and higher aviation turbine fuel and oil prices.
(ii) Lease-Rental Aircraft and Engines:Expenditure on lease rental aircraft and
engines increased by 26% to 12,967 million in FY 2018-19 from
10,321 million in FY 2017-18. This rise is on account of expansion in fleet and
airports.
(iii) Aircraft Maintenance Cost:Expenditure on aircraft maintenance cost increased by
27% to 15,043 million in FY 2018-19 from 11,880 million
in FY 2017-18. The increase in maintenance and repair costs was due to increase in
capacity and aircraft.
(iv) Employee Benefit/Expenses:Expenses with regard to employee remuneration and
benefits increased to ` 10,570 million in FY 2018-19 from 8,626 million in FY 2017-
18, an increase of 23% primarily due to increase in fleet size and airports.
(v) Selling Expenses:Selling expenses increased by 10% to 2,074 million for FY
2018-19 from 1,891 million for FY 2017-18. The increase is mainly due to increase in
the revenue.
(vi) Other Expenses:Other expenses increased by 39% largely due to increase in
capacity.
(vii) Finance Cost:Finance Cost increased by 42% to 1,313 million in FY 2018-19
from 922 million in FY 2017-18 due to increase in borrowing costs.
(viii) Depreciation and Amortisation:Depreciation and amortisation increased by 11%
to 2,562 million in FY 2018-19 from 2,312 million in FY 2017-18.
Though the total revenue is increased , the expenditure is also increased by a greater
rate , therefore the company underwent loss of 3,024.11 million.
Earnings per share is also in negative.
- Basic earnings per share (5.04)
- Diluted earnings per share (5.04)
The total Non- current assets have been increased from 30,785.78 million to
34,232.33 million, Total current assets increased from 9,406.75million to13,695.57
million.
Total non-current liabilities increased from 9,776.58million to15,232.04 million.
Total current liabilities increased from 30,975.15million to 36,195.50million.

Share Capital:There is no change in authorised share capital of the Company during

the financial year 2018-19. However, the paid-up share capital of the Company has
increased from 5,994,501,830 to 5,997,183,560 pursuant to allotment of 268,173
equity
shares of ` 10 each under SpiceJet Employee Stock Option Scheme - 2017.
Dividend:The Board of Directors have not recommended any dividend for the
financial year 2018-19. In terms of Regulation 43A of the SEBI (Listing Obligations
and Disclosure Requirements), Regulations, 2015, the Company has adopted the
Dividend Distribution Policy of the Company which is available on the website of the
Company at www.spicejet.com under the “Investor section”.
Transfer to Reserves:The Company has made no transfers to reserves during the
financial year 2018-19.

Analysis of Director’s Report:

We have seen the financial performance of the company before.
The Company has recorded another steady year of growth and profitability, despite
performing in a highly competitive environment in the aviation sector. Your Company has
added 36 new routes during the year under review.

The Company’s total income on standalone basis is Rs. 78,793.66 compared to previous
year’s Rs. 62,714.00 registering a steady growth of 25.64 % on a year over year basis. The
Company has earned standalone net profit of Rs. 5,666.51.

The Company completed its thirteenth year of operation on May 23, 2018 wherein it
continued to focus on consolidating its operations on key routes. As at the end of the financial
year the Company maintained a fleet size to 60 aircraft with which it operated approximately
410 flights per day covering 45 domestic and 7 international destinations. The Company has
been awarded as India’s ‘Best Domestic Airline’ at the prestigious Wings India Awards for
Excellence in the Aviation Sector organised by the Ministry of Civil Aviation, Government
of India and FICCI in March, 2018.

There was no change in nature of the business of the Company, during the year under review.

The Company has signed an agreement with CFM International for purchase of LEAP-1B
engines to power a total of 155 Boeing 737 MAX airplanes, along with spare engines to
support the fleet. The Company has also signed a ten year Rate per Flight Hour (RPFH)
agreement with CFM Services that covers all LEAP-1B engines powering 737 MAX
airplanes.

Your Company has been awarded 17 proposals and 20 new sectors under the second round of
bidding for the Government of India’s Regional Connectivity Scheme. Out of these 20, 15
will cater to unserved markets of Kannur (Kerala), Darbhanga (Bihar), Ozar (Nashik),
Pakyong (Sikkim), Kishangarh (Rajasthan), Lilabari (Assam), Thanjavur (Tamil Nadu),
Bokaro (Jharkhand) and Solapur (Maharashtra) whereas 5 will be for underserved markets of
Hubli (Karnataka) and Jaisalmer (Rajasthan). The Company is the largest and most organised
regional player in the country with a fleet of 24 Bombardier Q400 aircraft.

During October 2018, the Company inducted first Boeing 737 MAX aircraft which is a major
milestone in Company’s turnaround. These new aircraft will enable the Company to open
new routes, while reducing fuel and engineering costs, as well as emissions. The 737 MAX
aircraft will dramatically reduce noise pollution and greenhouse gas emissions. Passengers
will benefit from a large number of premium seats and, for the first time in India, broadband
internet on board.

BOARD OF DIRECTORS

a) In terms of the provision of Section 152(6) of the Companies Act, 2013, Mr. Ajay Singh is
liable to retire by rotation at the forthcoming Annual General Meeting of the Company and
being eligible, has offered himself for re-appointment.

b) The Company has received necessary declaration from each Independent Director under
Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence laid
down in Section 149(6) of the Companies Act, 2013.

c) Mr. R. Sasiprabhu (Independent Director) has resigned from the directorship of the
Company with effect from May 9, 2018.

Analysis of Auditor’s Report:

Auditor’s Opinion: Auditor’s have audited the accompanying standalone Ind AS financial
statements of SpiceJet Limited (the “Company”), which comprise the Balance sheet as at
March 31 2019, the Statement of Profit and Loss, including (Other Comprehensive Income)
the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies and
other explanatory information.

In their opinion and to the best of their information and according to the explanations given
to them, the aforesaid standalone Ind AS financial statements give the information required
by the Companies Act, 2013 (the “Act”) in the manner so required and give a true and fair
view in conformity with the accounting principles generally accepted in India, of the state of
affairs of the Company as at March 31, 2019, its loss including other comprehensive income
its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion

They conducted their audit of the standalone Ind AS financial statements in accordance with
the Standards on Auditing (SAs), as specified under section 143(10) of the Act. Our
responsibilities under those Standards are further described in the ‘Auditor’s Responsibilities
for the Audit of the Standalone Ind AS Financial Statements’ section of their report. They are
independent of the Company in accordance with the ‘Code of Ethics’ issued by the Institute
of Chartered Accountants of India together with the ethical requirements that are relevant to
their audit of the financial statements under the provisions of the Act and the Rules
thereunder .

Emphasis of Matter

Without qualifying our conclusion, we draw attention to Note 44 of the standalone Ind AS
financial statements regarding the uncertainties arising from the dispute with erstwhile
promoters and certain resultant possible non-compliances of applicable provisions of law.

Analysis of Accounting Policies:

1. Revenue from contracts with customer

Revenue from contracts with customers is recognised when control of the goods or
services are transferred to the customer at an amount that reflects the consideration to which
the Company expects to be entitled in exchange for those goods or services. The Company
has generally concluded that it is the principal in its revenue arrangements, except for the
agency services below, because it typically controls the goods or services before transferring
them to the customer. The revenue is recognized net of Goods and Service Tax (if any).

Rendering of services

Passenger revenues and cargo revenues are recognised as and when transportation is provided
i.e. when the service is rendered. Amounts received in advance towards travel bookings/
reservations are shown under current liabilities as contract liability. Fees charged for
cancellations or any changes to flight tickets and towards special service requests are
recognized as revenue on rendering of related services.

The unutilized balances in unearned revenue is recognized as income based on past statistics,
trends and management estimates, after considering the Company’s refund policy.
Revenue from wet lease of aircraft is recognised as follows:

a) The fixed rentals under the agreements are recognised on a straight line basis over the lease
period.

b) The variable rentals in excess of the minimum guarantee hours are recognised based on
actual utilisation of the aircraft during the period. Income in respect of hiring/ renting out of
equipment and spare parts is recognised at rates agreed with the lessee, as and when related
services are rendered. When another party is involved in providing services to its customer,
the Company determines whether it is a principal or an agent in these transactions by
evaluating the nature of its promise to the customer. The Company is a principal and records
revenue on a gross basis if it controls the promised services before providing them to the
customer.

The Company has applied the practical expedient and recognised the costs of selling airline
travel tickets as an expense when it is incurred.

Contract assets: A contract asset is the right to consideration in exchange for services
transferred to the customer. If the Company performs by transferring services to a customer
before the customer pays consideration or before payment is due, a contract asset is
recognised for the earned consideration that is conditional.

Sale of food and beverages:Revenue from sale of food and beverages is recognised when the
products are delivered or served to the customer. Revenue from such sale is measured at the
fair value of the consideration received or receivable, net of returns and allowances, trade
discounts and volume rebates. Amounts received in advance towards food and beverages are
shown under current liabilities as unearned revenue.

Training Income:Revenue from training income is recognized proportionately with the degree
of completion of services, based on management estimates of the relative efforts as well as
the period over which related training activities are rendered for individual employees by the
Company.

Interest:Interest income is recorded using the effective interest rate (EIR). EIR is the rate that
exactly discounts the estimated future cash payments or receipts over the expected life of the
financial instrument or a shorter period, where appropriate, to the gross carrying amount of
the financial asset. When calculating the effective interest rate, the Company estimates the
expected cash flows by considering all the contractual terms of the financial instrument (for
example, prepayment, extension, call and similar options) but does not consider the expected
credit losses. Interest income is included in finance income in the statement of profit and loss.

2. Employee benefits
i. Short-term benefits: Liabilities for wages and salaries, including non-monetary
benefits that are expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled. The liabilities are
presented as current employee benefit obligations in the balance sheet.
Accumulated leave, which is expected to be utilized within the next 12 months, is
treated as short-term employee benefit. The Company measures the expected cost of
such absences as the additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting date.
ii. Other long-term employee benefits:The Company treats accumulated leave
expected to be carried forward beyond twelve months, as long-term
employee benefit for measurement purposes. Such long-term compensated absences
are provided for based on the actuarial valuation using the projected unit credit
method at the year-end. Remeasurement gains/ losses are immediately taken to the
statement of profit and loss and are not deferred. The Company presents the
entire leave as a current liability in the balance sheet, since it does not have an
unconditional right to defer its settlement for 12 months after the reporting date.
iii. Post-employment benefits:The Company operates the following post-employment
schemes:
a. Gratuity:Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation. The cost of providing benefits under this plan is determined on the
basis of actuarial valuation at each year-end using the projected unit credit method.
Remeasurement, comprising of actuarial gains and losses, the effect of the asset
ceiling, excluding amounts included in net interest on the net defined benefit liability
and the return on plan assets (excluding amounts included in net interest on the net
defined benefit liability), are recognised immediately in the balance sheet with a
corresponding debit or credit to retained earnings through OCI in the period in which
they occur. Remeasurement is not reclassified to profit or loss in subsequent periods.
Past service cost is recognised in profit or loss on the earlier of the date of the plan
amendment or curtailment, and the date that the Company recognises related
restructuring costs. Net interest is calculated by applying the discount rate to the net
defined benefit liability or asset. The Company
recognises the following changes in the net defined benefit obligation as an expense
in the statement of profit
and loss:
- Service costs comprising current service costs, past-service costs and
- Net interest expense or income.
b. Retirement benefits
Retirement benefit in the form of provident fund is a defined contribution scheme.
The Company has no obligation, other than the contribution payable to the provident
fund. The Company recognizes contribution
payable to the provident fund scheme as an expenditure, when an employee renders
the related service.