Shishir Asthana
Two news items hit the Jet Airways stock on December 17, resulting in its share price falling nearly 4 percent, on a day when the market was up. The first news was that SBI, the lead banker for Jet Airways, had ordered a forensic audit of the company’s books for the period between April 1, 2014, and March 31, 2018.
Any banker ordering a forensic audit on a company is not good news since the impression it gives is that the bank suspects something. Why else should it not trust the books of accounts? In the case of Jet Airways, it is even more intriguing as the chosen period of 2014-2018 is right after Etihad invested over Rs 2,000 crore for a 24 percent stake in the company in 2013.
Some bankers have been quoted as saying ordering a forensic audit on the company is merely a procedural matter as Jet Airways has approached the banks for a restructuring of its loans. If that is indeed the case and the banks are seriously considering restructuring Jet’s loan then it is good news for the company that is struggling to keep afloat.
The money and more importantly the business which came in with Eithad was good enough for Jet Airways to survive for a few years. But a big reason for its survival was the low oil prices prevailing at the time. As soon as oil prices started rising, Jet was back in trouble.
There have been reports of Jet Airways not paying salaries on time, cutting unviable routes and moving towards a no-frills airline by stopping free meals. Jet Airways had earlier said it intends to cut its operating cost by Rs 2,000 crore over the next two years.
But this is where the restructuring story takes a U-turn, especially after the second news that hit the stock on December 17. Nikos Kardassis, the former CEO of Jet Airways, who was advising the company on restructuring and tasked with turning around the company has bailed out.
Investors generally look for cues like insider buying or selling, management recruitment or layoffs, to get an idea on the goings on within a company. Recently, a number of companies in India saw senior management quit, especially their CFOs, resulting in their stocks being hammered.
For Jet Airways, Kardassis quitting the company is one such moment where the man spearheading the restructuring has quit. His exit from the company suggests either Kardassis was not given a free hand to bring the company back in shape or he was found to be not good at his job. For a man who was the CEO of Jet Airways for 14 years and was brought in by the promoter Naresh Goyal himself in May 2018, it is unlikely that he was not good at his job.
The fact remains that Jet Airways is gasping for air and its fundraising efforts have not been successful. Plans of raising money from the Tata group or its knight in shining armour – Etihad--- have not been fruitful. Banks led by SBI seems to be biding their time by ordering a forensic audit at a moment when every day is important for the airline.
The view from Jet’s cockpit is clear--the airline is approaching stall speed and it is too close to the ground.
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