To the Members of SpiceJet Limited
Report on the Audit of the Standalone Ind AS Financial Statements Opinion
We have audited the accompanying standalone Ind AS financial statements of SpiceJetLimited (the_Company) which comprise the Balance sheet as at March 31 2019the Statement of Profit and Loss including (Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information (hereinafter referred to as the standalone Ind AS financialstatements).
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act_2013 (the Act) in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March_31_2019 its loss includingother comprehensive income its cash flows and the changes in equity for the year ended onthat date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Emphasis of Matter
Without qualifying our conclusion we draw attention to Note 44 of the standalone IndAS financial statements regarding the uncertainties arising from the dispute witherstwhile promoters and certain resultant possible non-compliances of applicableprovisions of law.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2019. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|Provision for aircraft maintenance (Refer note 20 25 and 37 of the standalone Ind AS financial statements) || |
|As at March 31 2019 the Company operated 65 aircraft under operating leases in respect of which the Company has contractual regulatory or other constructive obligations for maintenance of such aircraft and/or specific components thereof. ||Our audit procedures in this regard included the following: |
| ||We assessed the design implementation and operating e_ectiveness of management's key internal controls over accounting for maintenance provisions for aircraft held under operating leases; |
|Key audit matters ||How our audit addressed the key audit matter |
|Management estimates such maintenance costs at the end of each reporting period and accrues such costs over the lease term. The calculation of such costs and related provision include a number of variable factors judgements and assumptions including the anticipated utilisation of the aircraft cost of maintenance and the expected drawdown from the supplemental rental contribution. Provisions for aircraft maintenance costs aggregate Rs5799.54 million as at March 31 2019. ||We evaluated the provisioning model methodology and key assumptions adopted by management in estimating the provisions and any changes therein by reviewing the terms of the operating leases and terms of maintenance contracts with third party vendors and comparing assumptions to contract terms information from the lessors and the Company's maintenance cost experience; |
|We have identified provision for aircraft maintenance as a key audit matter because of the inherent level of complex and subjective management judgements required in assessing the variable factors and assumptions in order to quantify the provision amounts. ||We discussed with the appropriate personnel in the engineering department responsible for aircraft engineering the utilisation pattern of the aircraft and considering the consistency of the provisions with the engineering department's assessment of the condition of aircraft; |
| ||We assessed the maintenance costs incurred and provisions made in earlier years to evaluate the judgement and decisions made by management in estimating the provisions. We assessed the adequacy of the related disclosures. |
|Capitalisation of aircraft maintenance and overhaul costs (Refer note 37 and 2(A)(c) of the standalone Ind AS financial statements) || |
|The Company has entered into certain engine maintenance agreements with engine manufacturers where the maintenance costs are predicated primarily on the actual use of the related underlying assets. ||Our audit procedures to assess aircraft maintenance and overhaul costs included the following: |
| ||We read the power-by-hour agreements to gain a detailed understanding of the significant terms which influence the economics of and hence accounting for the agreements. |
|The cost incurred for overhauls under these agreements has the economic effect of extending the useful lives of the engines. This is first recognised as a prepayment and is capitalised in the carrying amount of the aircraft when an overhaul is carried out. ||We assessed the design and implementation of key internal controls in place relating to the methodologies and assumptions used in determining the appropriate accounting outcomes for these agreements. |
|Major inspection costs relating to heavy maintenance visits for overhauls of engines are capitalised. These amounts are depreciated over the average expected life between major overhauls. ||We assessed the interval between major overhauls and reviewing the reasonableness of the estimates of the useful lives of major engine overhaul events. |
|Determining the useful lives of maintenance inspections requires judgement and is a key focus for our audit. ||We assessed the compliance of the accounting treatment applied to maintenance costs with industry practice and the requirements of accounting principles generally accepted in India. |
| ||We assessed the adequacy of the related disclosures. |
|Management's assessment of appropriateness of going concern assumption (Refer note 2(A)(a)(iii) of the standalone Ind AS financial statements) || |
|The Company's cash flow forecasts used to assess the appropriateness of the going concern assumption reflect management's business plan and their response to a range of uncertainties including among other matters fuel prices exchange rate fluctuation and other emerging business trends. ||Our audit procedures in this regard included the following: |
| ||We discussed with management and assessed and challenged the assumptions judgements and estimates used in developing their business plan and cash flow projections having regard to historical performance and current emerging business trends affecting the business and industry. |
|In addition there are significant cash inflows and outflows expected in financial year ending March_31 2020. Management has prepared cash flow forecasts which involve estimations based on management's input of key variables and market conditions including the future economic conditions. Management has also used significant judgement and estimates to develop a number of assumptions in respect of these uncertainties based on which they have concluded that the going concern basis of accounting is appropriate. ||We tested the arithmetical accuracy of the models used to prepare the Company's forecasts which included understanding the data inputs calculations and reporting of outputs and performing a sensitivity analysis of the assumptions and judgements made by the Management in those forecasts including inputs to the model used to estimate the future cash flows. |
| ||We assessed the timing of various recurring and other events affecting significant cash inflows and outflows over the next twelve months and where possible the foreseeable future. |
|In view of these factors and the judgements estimates and assumptions involved in developing the said cash flow projections to support the going concern assumption we identified this matter as a key audit matter. ||We assessed any potential restrictions on cash balances including deposits and the possibility of occurrence and e_ect of contractual covenants that could be imposed on the Company. |
| ||We assessed management's cash flow forecasts related to maintenance obligations on aircrafts comparing this to the current maintenance condition of the aircraft and recent experience of shop visits and end of lease handback checks. |
| ||We assessed the Company's responses to the emerging business trends and consequential impact on the cash flows of the Company. |
| ||We assessed the Group's disclosures regarding going concern in the financial statements. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone Ind AS financial statements and our auditor's report thereon. The Annualreport is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether the other information is materially inconsistent withthe standalone IND AS financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Charged with Governance are also responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the standalone Ind ASfinancial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation. We communicate with those charged with governance regardingamong other matters the planned scope and timing of the audit and significant auditfindings including any significant deficiencies in internal control that we identifyduring our audit. We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements for the financial year ended March 31 2019 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 (the Order)issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure 1 a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit; (b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books; (c) The Balance Sheet the Statement ofProfit and Loss including (Other Comprehensive Income) the Cash Flow Statement andStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account; (d) In our opinion the aforesaid standalone Ind AS financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withCompanies (Indian Accounting Standards) Rules 2015 as amended; (e) On the basis of thewritten representations received from the directors as on March 31 2019 taken on recordby the Board of Directors none of the directors is disqualified as on March 31 2019 frombeing appointed as a director in terms of Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report inAnnexure 2 to this report; (g) In our opinion the managerial remuneration forthe year ended March 31 2019 has been paid/ provided by the Company to its directors inaccordance with the provisions of section 197 read with Schedule V to the Act; (h) Withrespect to the other matters to be included in the Auditor's Report in accordance withRule 11 of the Companies (Audit and Auditors) Rules 2014 as amended in our opinion andto the best of our information and according to the explanations given to us: i. TheCompany has disclosed the impact of pending litigations on its financial position in itsstandalone Ind AS financial statements Refer Note 43 to the standalone Ind ASfinancial statements; ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses; iii. There wereno amounts which were required to be transferred to the Investor Education and ProtectionFund by the Company
|For S.R. Batliboi & Associates LLP || |
|Chartered Accountants || |
|ICAI Firm Registration Number: 101049W/E300004 || |
|per Aniruddh Sankaran || |
|Partner ||Place : Gurgaon |
|Membership Number: 211107 ||Date : May 28 2019 |
ANNEXURE 1 REFERRED TO IN PARAGRAPH 1 OF THE SECTION REPORT ON OTHER LEGAL ANDREGULATORY REQUIREMENTS OF OUR REPORT OF EVEN DATE
Re: SpiceJet Limited (the Company)
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) All property plant and equipment have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the company.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities granted in respect of whichprovisions of section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) The Company has not accepted any deposits from the public within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 asamended. However to the extent discussed in Note 44 of the financial statements theCompany is not in compliance with the provisions of section 73 to 76 and other relevantprovisions of the Companies Act 2013 and the rules framed there under in relation toadvances which were received towards securities proposed to be issued which are deemed asdeposits under the Companies Act 2013.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148 (1) of the Act for theproducts/ services of the Company.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of custom value added tax goods andservice tax cess and other statutory dues have not generally been regularly depositedwith the appropriate authorities though the delays in deposit have not been serious. Theprovisions relating to excise duty are not applicable to the Company.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax goods and service tax cessand other statutory dues were outstanding at the year end for a period of more than sixmonths from the date they became payable. The provisions relating to excise duty are notapplicable to the Company. (c) According to the records of the Company the dues ofincome-tax sales-tax service tax duty of custom duty of excise value added tax goodsand service tax and cess on account of any dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs in million) ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service tax (including penalty for delay) ||170.70 ||April 2006 to March 2012 ||Customs Excise and Service Tax Appellate Tribunal |
|Customs Act 1962 ||Customs (including penalty for delay) ||42.28 ||December 2012 to March 2017 ||Customs Excise and Service Tax Appellate Tribunal |
|Goods and Services Tax Act 2017 ||Integrated goods and services tax ||1460.30 ||August to October 2017 ||GST Appellate Tribunal |
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to afinancial institution bank or government or dues to debenture holders. (ix) In ouropinion and according to the information and explanations given by the management theCompany has utilized the_monies raised by way of term loans_for the purposes for whichthey were_raised.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or on the Company by theofficers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid/ provided in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Companies Act 2013(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company andhence not commented upon.
|For S.R. Batliboi & Associates LLP || |
|Chartered Accountants || |
|ICAI Firm Registration Number: 101049W/E300004 || |
|per Aniruddh Sankaran || |
|Partner ||Place : Gurgaon |
|Membership Number: 211107 ||Date : May 28 2019 |
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND ASFINANCIAL STATEMENTS OF SPICEJET LIMTED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of SpiceJetLimited (the_Company) as of March 31 2019 in conjunction with our audit ofthe Standalone Ind AS financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of
Chartered Accountants of India. These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the Guidance Note) and the Standards on Auditing as specified under section143(10) of the Companies Act
2013 to the extent applicable to an audit of internal financial controls bothapplicable to an audit of Internal Financial
Controls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the Standalone Ind AS financial statements whether due to fraudor error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls system overfinancial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of Standalone Ind AS financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of StandaloneInd AS financial statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the StandaloneInd AS financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of Chartered
Accountants of India.
|For S.R. Batliboi & Associates LLP |
|Chartered Accountants |
|ICAI Firm Registration Number: 101049W/E300004 |
|per Aniruddh Sankaran |
|Partner Place : Gurgaon |
|Membership Number: 211107 Date : May 28 2019 |