India Ratings cuts Goair debt, flags liquidity issue
India Ratings has downgraded Goair’s debt and has flagged concerns about liquidity and deterioration in operating performance in FY21.
Goair’ overall debt increased 6 per cent on a sequential basis to ~1,891 crore in the June quarter and its unencumbered cash and bank balance nearly halved to
~72.5 crore during the same period (from ~140.9 crore on March 31), the agency has said in a report. The overall debt included borrowing from promoter group companies to support business operations.
Domestic flight operations resumed after two-month suspension on May 25, and even now passenger occupancy is less than 60 per cent.
Goair began operations from June 1 and is said to be operating 15-18 aircraft daily. Loss of revenue during lockdown, muted passenger demand and high fixed cost remain a concern.
In its latest revision, the agency has downgraded the rating for fund-based working capital limit and retained negative watch on loan. Goair did not immediately respond to an email query on the topic.
The agency expects sharp decline in Goair’s revenue and operating margin in FY21. According to provisional figures, Goair’s revenue grew 13 per cent to ~7,100 crore in FY20 supported by 28 per cent increase in passengers. The airline is estimated to have made a net loss of ~1,346 crore in FY20 as against net profit of ~123 crore in FY19 due to higher provisioning and forex loss. But the airline’s revenue profile will be hit in FY21 and rupee depreciation will continue to weigh on overall costs of the company.
The agency believes that cost saving measures like sending employees on leave without pay is unlikely to boost profitability.
While the average working utilisation of the sanctioned fund based limits stood at 55 per cent during the 12 months ended June 2020, the same increased significantly to about 89 per cent during March–june 2020. Given the loss of revenue during AprilMay and the likely impact of lower passenger traffic in the near term amid the fixed costheavy structure, India Ratings believes the airline’s liquidity needs would remain significantly high.