Mumbai, May 24 - A day after the airline major Jet Airways' auditors red-flagged its future plans on cost reduction and fund mobilisation to avert "uncertainties" created by a net loss and negative net worth, the company's stocks crashed by over 7% on Thursday.
The massive plunge in Jet's scrip comes after the auditors expressed their doubt over the appropriateness of preparing the company's financial results "on a going concern basis".
For the uninitiated a "going concern basis" is an accounting term which basically refers to a firm's ability to generate enough financial resources to stay in business or avoid bankruptcy. However, even the investors were not convinced and dumped the stock.
On Thursday, Jet's stocks on the BSE plunged by 7.03 per cent or Rs 29.60 to Rs 391.55 per share from its previous close of Rs 421.15 per share.
The development assumes significance as it comes after the company reported a standalaone net loss of Rs 1,036 crore for the fourth quarter of 2017-18 from a net profit of Rs 602.42 crore reported for the corresponding period of 2016-17.
In terms of financial year, Jet Airways reported a standalone net loss of Rs 767.62 crore from a net profit of Rs 1,482.52 crore reported for the previous fiscal.
On a consolidated basis, the aviation major reported a net loss of Rs 636.45 crore in 2017-18 from a net profit of Rs 1,498.68 crore in 2016-17.
Jet blamed its weak financial performance on the rise in Brent fuel without a corresponding increase in air fares, as well as mark-to-market adjustments due to a depreciating rupee.
"The company has incurred a loss during the year and has negative net worth as at 31st March, 2018 that may create uncertainties. However, various initiatives undertaken by the company in relation to saving cost, optimise revenue management opportunities and enhance ancillary revenues is expected to result in improved operating performance," the company had said in the notes of its earnings results.
"Accordingly, the statement of financial results continues to be prepared on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business including financial support to its subsidiaries."
Reacting to the specific note on the appropriateness of assumption of going concern, Jet' auditors said: "Our opinion is not modified in respect of this matter."