Wadia group holding co makes provisions on investment in Go Air
Bombay Burmah has made a provisioning of ₹1,866 crore on its investments in Go Airlines and other related financial obligations for FY23
PremiumMumbai: Bombay Burmah Trading Corporation Limited (BBTCL), the holding company of the Wadia Group, has made a provisioning of ₹1,866 crore on its investments in Go Airlines and other related financial obligations for FY23.
The provision has been made pursuant to an application filed by Go Airlines Ltd, the company that runs Go First, before the National Company Law Tribunal (NCLT) under section 10 of the Insolvency and Bankruptcy Code (IBC). The airline moved NCLT on 2 May and its application was admitted on 10 May.
The company suspended operations on May 3 and has not announced a date to resume flight operations.
“As an investment company, BBTCL has made strategic investments across various businesses and geographies to enhance shareholder value... Over the years, BBTCL has actively invested in GoAir since 2005, recognizing the airline business as a potential growth area, particularly in the low-cost segment," the holding company said in a statement.
The airline has blamed Pratt & Whitney, the engine maker, for their financial problems. The airline’s fleet was powered by gear turbo fan (GTF) engines.
The airline said that the financial troubles turned insurmountable due to grounding of half of it PW-powered 52 aircraft fleet that lead to decline in revenues and losses.
“However, GoAir's financial situation deteriorated significantly due to a series of challenges, including the grounding of a substantial portion of its fleet and engine issues. GoAir had purchased 72 Airbus aircraft powered by Pratt & Whitney (P&W) engines, with the expectation of fuel savings and reliability. Unfortunately, the engines supplied by P&W did not meet the required standards, resulting in extensive maintenance requirements and grounding of aircraft," the company said.
As a result of GoAir's financial difficulties, BBTCL has decided to fully provide for its total exposure in GoAir, except for the investment of Rs. 290 Cr made, post the reporting period. This provision will have a significant impact on BBTCL's financial results for the current financial year, it added.
The company along with its subsidiaries holds 32.61% of the paid-up equity share capital of Go Airlines, an unlisted company. Based on legal opinion and further based on internal evaluation made by the Company, there is no de facto control of the Company over BDMC.
Bombay Burmah Trading Corporation Limited (BBTCL) reported consolidated total income of ₹17,079 crores and net loss of Rs. 533 crores for the year ended March 31, 2023.
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