SBI orders forensic audit of Jet Airways’ books

Mumbai: The State Bank of India (SBI) has ordered a forensic audit of the books of Jet Airways (India) Ltd to examine the feasibility of restructuring its debts and identify potential red flags in accounts. The audit has been awarded to EY LLP, which will probe the troubled airlines’ books between 1 April 2014 and 31 March 2018, a person with direct knowledge of the matter said.

Forensic audits are also conducted when there is a proposal to restructure loans of the company and when extra funding is required, particularly in companies where there are cash-flow challenges, said a banker who is part of the consortium of lenders to Jet Airways.

“In this case, we are looking at a debt restructuring proposal for Jet Airways and, therefore, a thorough audit is necessary,” the banker said, requesting not to be named. Lenders also conduct such forensic audits when they get credible complaints against a company, said a second banker.

“While the bank receives several complaints from investors regarding specific accounts, we take up only some after thoroughly looking into the nature of the complaint. The rest are quite frivolous,” the second banker said on condition of anonymity.

SBI received a complaint in November where the allegations were “financial in nature” and asked the complainant to wait for the completion of the forensic audit, which had already been ordered, said the first banker.

An email sent to Jet Airways seeking comment remained unanswered till publishing of this story.

Jet Airways, which had 13.3% share of the domestic aviation market in October, needs to urgently raise cash to stay afloat, hurt by fuel prices and a weak rupee.

Naresh Goyal-led Jet Airways posted a net loss of ₹ 1,297.46 crore in the second quarter of fiscal year 2018-19 , excluding its units, its third successive loss. It had a net profit of ₹ 49.63 crore in the same period a year earlier.

The airline, which has delayed payment of salaries to a section of staff, including pilots and senior employees, is in talks with Etihad Airways PJSC for an rescue act. The Abu Dhabi-based airline has offered to guarantee loans worth $150 million that Jet needs to keep the airline operational, Mint reported on 7 December. The development followed several rounds of talks between the two sides, including discussions on a potential equity infusion by Etihad Airways and adding a third Indian partner.

Etihad has already come to Jet Airways’s rescue once in 2013 when it picked up a 24% stake in the carrier, but the situation is different this time.

Jet had a net debt of ₹ 8,052 crore as of 30 September.

In August, the airline’s board approved a turnaround plan, which includes cutting costs by more than ₹ 2,000 crore over two years, leveraging its stake in the loyalty programme Jet Privilege Pvt. Ltd, improving pricing and capital infusion.

An SBI spokesperson said that it is the policy of the bank not to comment upon individual accounts and their treatment.