Naresh Goyal's firm had Rs 260 crore cash when financial crunch hit Jet Airways
BusinessToday.In April 22, 2019
Naresh Goyal-owned company Jetair Pvt Ltd (JPL) did not employ any of its credit facilities from banks to stay debt-free at a time when Jet Airways was manifesting signs of financial distress. The credit facilities with JPL which is a general sales agent (GSA) to Jet were to the tune of Rs 28 crore.
JPL had a cash reserve of Rs 260 crore as on December 2018. Jetair's stake was divested in UPS Jetair Express in October 2018 and around Rs 232 crore in cash was raised.
The company submitted an Expression of Interest (EOI) to acquire Jet Airways on April 12, after the deadline to submit the bids ended. The EOI was not accepted as other bidder objected to it, the Business Standard reported.
Listed entity Jet was Jetair's main source of revenue. The private company was getting around Rs 4 crore per month from Jet for offline bookings as a GSA. As the airline has shut operations (temporarily) now, it has also left JPL in the lurch.
The company was getting a commission of up to 1% from the BSE-listed Jet India and up to 3% from other airlines. JPL also got a commission of 2.5% on the cargo bookings from all airlines, the report said.
Some bankers are of the view that JPL's offer to acquire Jet was far-fetched because Jet's cash flow hinged on the financial profile of the airline as it contributed almost 78% to JPL's total income.
Jetair was forced to extend the collection period from Jet Airways from 190 days (as of March 31, 2016), to 271 days (as of March 31, 2018). The extension was made on account of dwindling liquidity of the airline over the past few years.
The report further said that as Jet Airways was showing signs of the financial crisis, JPL began de-risking its revenue model and expanded operations in the call centre business. The company as a result of this diversification decreased its share of commission income it earned from Jet Airways to 78% in FY 18 from 84% in FY16.
JPL posted revenue of Rs 86.4 crore for the Financial Year ending March 2018 as compared to Rs 75.5 crore for FY17. The company also reported a net profit of Rs 22.4 crore in the same period for FY18 as against Rs 21.4 crore in FY17.
While Jet Airways defaulted on its debt payments from December 2018, JPL did not take any long-term secured loan. It had Rs 2.19 crore worth of outstanding working capital borrowings.
A CARE rating statement released in December 2018 said that, owing to low leverage, JPL sustained healthy debt coverage ratios and a strong capital structure. All this further improved as the company's net worth grew and (total) debt reduced in FY18.