SBI begins forensic audit to identify red flags in Jet books
MUMBAI: India’s largest lender State Bank of India (SBI) has ordered a forensic audit of the books of troubled Jet Airways (India) Ltd to ascertain the feasibility of debt restructuring of the airline and identify potential red flags in Jet’s accounts.
The audit has been awarded to E&Y Llp who will probe the airlines’ books between April 1, 2014 and March 31, 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 any extra funding is required, particularly in companies where there are cash flow challenges, said a banker who is part of t he consortium of lenders to the airline.
“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 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 forensic audit, which had already been ordered, to be completed, said the first banker quoted above.
An email sent to Jet Airways seeking comments remained unanswered till press time.
Jet Airways, which had 13.3% share of the domestic aviation market in October, needs to urgently raise cash to stay afloat, as costly fuel and a weak rupee have hurt its financial health.
Naresh Goyal-led airline posted a net loss of ₹1,297.46 crore, excluding its units, its third successive loss. It had a net profit of ₹49.63 crore in the same period a year earlier.
Moreover, the airline has delayed payment of salaries to a section of its staff, including pilots and senior employees.
The airline 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 Airways (India) Ltd needs to keep the airline operational, Mint reported on 7 December. The development follows several rounds of talks between the two sides, including discussions on a potential equity infusion by Etihad Airways and adding a third Indian partner.
An SBI Spokesperson said that it is the policy of the bank not to comment upon individual accounts and their treatment.