Naresh Goyal's Jetair had cash in surplus when Jet crisis started to show

The private entity's main revenue source was from the listed entity Jet Airways, which was paying close to Rs 4 crore a month to the company for offline bookings as a general sales agent

When Jet Airways was showing signs of financial crisis, its former chairman Naresh Goyal’s private entity, Jetair Pvt Ltd (JPL), did not utilise any of its credit facilities worth Rs 28 crore from banks in its effort to remain debt-free. 

As on December last year, the Goyal-owned company had cash of Rs 260 crore and had submitted an expression of interest (EoI) to take over the airline on April 12, only after the bid submission deadline.

Around Rs 232 crore cash was raised by divesting Jetair’s stake in UPS Jetair Express in October last year, said a banker close to the development. He said the EoI was not accepted since other bidders raised objections.

The private entity’s main revenue source was from the listed entity Jet, which was paying close to Rs 4 crore a month to the company for offline bookings as a general sales agent. The airline has now shut down, putting 20,000 employees out of job apart from putting JPL’s future in a crisis.

Goyal’s company was receiving up to 1 per cent commission from the BSE-listed Jet India and up to 3 per cent from other airlines. It also received a commission of 2.5 per cent on the cargo booked from all airlines. 

According to bankers, the offer to take over Jet by JPL was unviable, as its cash flow remained susceptible to financial profile of the airline as it contributed almost 78 per cent to Jetair’s total income. 

Due to the deterioration in the liquidity profile of the airline over the past few years, Jetair had to extend the collection period from the airline from 190 days as of March 31, 2016, to 271 days as of March 31, 2018.

Besides, when the airline was showing signs of distress, JPL started de-risking its revenue model and diversified into the call centre business. As a result, it reduced the share of commission income earned from the airline to 78 per cent in FY18 from 84 per cent in FY16. For the financial year ending March 2018, JPL reported a revenue of Rs 86.4 crore as compared to Rs 75.5 crore for FY17. In the same period, JPL posted a net profit of Rs 22.4 crore for FY18 as compared to Rs 21.4 crore in FY17.

Even as the airline defaulted on its debt from December 2018, JPL didn’t take any long-term secured loan. The company had outstanding working capital borrowings to the tune of Rs 2.19 crore. Because of low leverage, the company maintained healthy debt coverage ratios and a robust capital structure, which further improved on account of accretion to net worth and reduction of total debt in FY18, said a CARE rating statement dated December 26, 2018.