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SpiceJet Ltd.

BSE: 500285 Sector: Services
NSE: SPICEJET ISIN Code: INE285B01017
BSE 00:00 | 09 Apr 46.90 2.20
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46.90

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46.90

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46.90

NSE 00:00 | 09 Apr 46.75 2.20
(4.94%)
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46.75

HIGH

46.75

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OPEN 46.90
PREVIOUS CLOSE 44.70
VOLUME 89957
52-Week high 156.90
52-Week low 30.80
P/E
Mkt Cap.(Rs cr) 2,814
Buy Price 46.90
Buy Qty 127922.00
Sell Price 46.80
Sell Qty 40.00
OPEN 46.90
CLOSE 44.70
VOLUME 89957
52-Week high 156.90
52-Week low 30.80
P/E
Mkt Cap.(Rs cr) 2,814
Buy Price 46.90
Buy Qty 127922.00
Sell Price 46.80
Sell Qty 40.00

SpiceJet Ltd. (SPICEJET) - Director Report

Company director report

Dear Members

Your Directors hereby present the report of the business and operations of your Companyalong with the audited financial statements for the financial year ended March 31 2019.

1. Financial Performance

The Company's performance during the year ended March 31 2019 compared to the previousfinancial year is summarised below:

(Amount in Rs million)

Particulars Standalone Consolidated
March 31 2019 March 31 2018 March 31 2019 March 31 2018
Total Revenue 91715.44 78352.09 91797.65 78396.52
Expenses
Operating Expenses 73000.54 55449.97 72948.77 55449.95
Cost of inventory consumed - - 138.91 32.11
Employee Benefit Expenses 10570.07 8625.67 10584.24 8616.93
Selling Expenses 2074.41 1890.62 2081.66 1900.38
Other Expenses 5586.40 4015.84 5421.59 4085.83
Earnings before interest tax depreciation and 484.02 8369.99 622.48 8311.32
amortization
Depreciation and amortisation expense (2562.25) (2312.00) (2563.54) (2313.18)
Interest income on bank deposits 864.90 530.42 864.90 497.22
Finance Cost (1312.84) (921.90) 1313.03 (923.30)
Profit/ (Loss) before taxation and extraordinary (2526.17) 5666.51 (2389.19) 5572.06
items
Tax Expenses - 0.26 -
Extraordinary items (634.66) - (634.66) -
Profit/ (Loss) after taxation (3160.83) 5666.51 (3024.11) 5572.06
Profit/ (Loss) brought Forward (16362.66) (22031.51) (16492.19) (22066.59)
Depreciation expense adjusted against reserves - - - -
Profit/ (Loss) for the year (3160.83) 5666.51 (3024.11) 5572.06
Other comprehensive income (14.45) 2.34 (14.45) 2.34
Amount transferred to Balance Sheet (19537.94) (16362.66) (19530.75) (16492.19)

During the year under review the standalone income of the Company increased toRs_91715.44 million compared to Rs_78352.09 million in the previous year registeringgrowth of 17.06% and the consolidated income increased to Rs_91797.65 million compared toRs_78396.52 million in the previous year registering growth of 17.09%. This financialyear saw a 25% increase in aviation turbine fuel prices and 9% depreciation of the IndianRupee that resulted in cost escalations and the Company reported standalone net loss ofRs_3160.83 million.

2. State of Affairs and Material Development

(a) The Company completed its fourteenth year of operation on May 23 2019 andcontinued to focus on consolidating its operations on key routes and as on March 31 2019maintained a fleet size of 76 aircraft with which it operated approximately 460 flightsper day covering 53 domestic and 9 international destinations.

(b) This fiscal year again witnessed the Company's unyielding commitment towardsRegional Connectivity Scheme of Government of India which aimed at making air travela_ordable and widespread enabling inclusive job growth and infrastructure development ofall regions and states of India. During the year under review the Company on-boarded

6 destinations across the country onto the national aviation map including AdampurKanpur Kishangarh Pakyong Lakhimpur and Jharsuguda. The Company is the largest and mostorganised regional player in the country with 42 daily flights and operates to 12destinations under the Regional Connectivity Scheme providing air connectivity to the mostremote destinations in India.

(c) The Company is eyeing an aggressive expansion plan across both its domestic andinternational network. As part of its international expansion strategy the Company hassigned a Memorandum of Understanding for interline and codeshare arrangement withEmirates one of the world's largest airlines. This will enable the passengers from Indiato enjoy seamless connectivity leveraging Emirates vast network across Europe AfricaAmerica and the Middle East. Those travelling to India on Emirates will be able to travelall destinations across Company's domestic network.

(d) SpiceXpress: The Company had announced the launch of its dedicated air cargoservices namely “SpiceXpress” in September 2018 and inducted its first freighteraircraft at a grand ceremony held at the Indira Gandhi International Airport in New Delhi.The cargo services operates on both domestic and international routes and is powered byfully integrated transportation network including air cargo ground transportation andwarehousing facilities across the country. SpiceXpress operates on an incremental directoperating cost model thereby extending its operations through its common pool of resourceslike pilots engineers ground staff and airport infrastructure.

(e) Spice Star Academy: With a vision to develop and train world class cabin crew andalso to attract best talent the Company has also launched Spice Star Academy in June2018 a first of its kind initiative by an airline. Spice Star Academy has collaboratedwith various universities which offers Bachelor of Business Administration degree. Itprovides a launch pad to aspiring young women and men who want to join the exciting worldof aviation. The academy nurtures talent through world-class training programs in order todeliver the finest quality of resources to airlines. The academy facilitates skilldevelopment for potential and aspiring cabin crew members.

(f) 737 MAX Grounding: Following the tragic crash of two Boeing 737 MAX aircraft (“MAXaircraft”) operated by Lion Air and Ethiopian Airlines on October 29 2018 andMarch 10 2019 all civil aviation authorities including the Directorate General of CivilAviation (India) and the Federal Aviation Administration (USA) issued order(s) to suspendoperations of MAX aircraft leading to worldwide grounding of MAX aircraft during March2019. Consequent to these orders the Company's fleet of thirteen MAX aircraft continuesto be grounded and despite its inability to undertake revenue operations the Companycontinues to incur various costs with respect to MAX aircraft. There continues to beuncertainty in the timing of the return to operations of MAX aircraft and the Companycontinues to work with the aircraft manufacturer to address the above including seekingreimbursement of ascertained costs and losses based on its assessment.

(g) Dispute with erstwhile promoters: The Company had in earlier financial yearsreceived amounts aggregating Rs_5790.9 million from its erstwhile promoters as advancemoney towards proposed allotment of certain securities (189091378 share warrants and3750000 non-convertible cumulative redeemable preference shares issuable based onapprovals to be obtained) to be adjusted at the time those securities were to be issued.Pursuant to the legal proceedings in this regard before the Hon'ble High Court of Delhi (“Court”)between the erstwhile promoters the present promoter and the Company the Company wasrequired to secure an amount of Rs_3290.9 million through a bank guarantee in favour ofthe Registrar General of the Court (“Registrar”) and to deposit thebalance amount of Rs_2500.0 million with the Registrar. The Company has complied withthese requirements within the stipulated time.

The parties to the aforementioned litigation concurrently initiated arbitrationproceedings before a three member arbitral tribunal (the “Tribunal”)which pronounced its award on July 20 2018 (the “Award”). In terms ofthe Award the Company was required to (i) refund an amount of Rs_3082.2 million to thecounterparty (ii) explore the possibility of allotting preference shares in respect ofRs_2708.7 million failing which refund such amount to the counterparty and (iii) payinterest calculated to be Rs_924.7 million (being interest on the amount stated under (i)above in terms of the Award). The amounts referred to under (i) and (ii) aboveaggregating Rs_5790.9 million continue to be carried as current liabilities withoutprejudice to the rights of the Company under law. Further the Company was entitled toreceive from the counterparty under the said Award an amount of Rs_290.0 million of pastinterest/servicing charges. The Company its present promoter and the counterparties havechallenged various aspects of the Award including the abovementioned interest obligationsand rights petitions for which have been admitted by the Court and notices issued as aresult of which the matter is currently sub-judice.

There are no material changes and commitments affecting the financial position of theCompany between the end of the financial year under review and the date of this report tothe extent stated elsewhere in this report.

3. Board of Directors

(a) In terms of the provision of Section 152(6) of the Companies Act 2013 Mrs.Shiwani Singh is liable to retire by rotation at the forthcoming Annual General Meeting ofthe Company and being eligible has offered herself for re-appointment. (b) Mr. AjayChhotelal Aggarwal was appointed as additional director on the Board of the Company onFebruary 11 2019 and shall hold office upto the date of ensuing Annual General Meeting.The Company has received notice under Section 160 of the Companies Act 2013 proposing hiscandidature for the office of Director and the members are requested to consider the same.

(c) Mr. Manoj Kumar was appointed as additional director on the Board of the Company onMay 28 2019 and shall hold office upto the date of ensuing Annual General Meeting. TheCompany has received notice under Section 160 of the Companies Act 2013 proposing hiscandidature for the office of Director and the members are requested to consider the same.(d) The Company has received necessary declaration from each Independent Director underSection 149(7) of the Companies Act 2013 that they meet the criteria of independencelaid down under Section 149(6) of the Companies Act 2013 read with the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. e) Mr. R. Sasiprabhu(Independent Director) has resigned from the directorship of the Company with effect fromMay 9 2018. The Board extends its gratitude for his contributions during his tenure asdirector.

4. Share Capital

There is no change in authorised share capital of the Company during the financial year2018-19. However the paid-up share capital of the Company has increased fromRs_5994501830 to Rs_5997183560 pursuant to allotment of 268173 equity shares ofRs_10 each under SpiceJet Employee Stock Option Scheme - 2017.

5. Dividend

The Board of Directors have not recommended any dividend for the financial year2018-19.

In terms of Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has adopted the Dividend Distribution Policyof the Company which is available on the website of the Company at www.spicejet.com underthe “Investor section”.

6. Transfer to Reserves

The Company has made no transfers to reserves during the financial year 2018-19.

7. Public Deposits

The Company has not accepted any deposits covered under Chapter V of the Companies Act2013. Accordingly no disclosure or reporting is required in respect of details relatingto deposits covered under this Chapter.

8. Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theannual return in the prescribed format is annexed as “Annexure - A” to thisreport.

9. Particulars of Contracts or Arrangement made with Related Parties

All related party transactions that were entered into during the financial year underreview were at arm's length basis and were in the ordinary course of business. All relatedparty transactions have been placed before the Audit Committee and the Board for theirapproval as per the provisions of the Companies Act 2013. The Board of Directors of theCompany has formulated a policy on materiality of related party transactions and also ondealing with related party transactions pursuant to the provisions of the Companies Act2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 andthe same is available on the website of the Company at www.spicejet.com under the“Investor section”.

No material related party transactions (i.e. transactions exceeding the thresholds asdefined under the Companies Act 2013) were entered during this financial year by theCompany. Accordingly the disclosure of related party transactions as required underSection 134(3)(h) of the Companies Act 2013 in Form AOC-2 is not applicable.

10. Particulars of Loans Guarantees or Investments under Section 186 of the CompaniesAct 2013

The Company has not granted any loan given guarantee or security or made investmentunder the provisions of Section 186 of the Companies Act 2013 during the financial yearunder review except as follows: a) As on March 31 2019 the Company has made aninvestment of Rs_0.10 million each in equity shares of its wholly owned subsidiariesnamely SpiceJet Merchandise Private Limited SpiceJet Technic Private Limited and CanvinReal Estate Private Limited; and b) As on March 31 2019 the Company has an investment ofRs_0.24 million in class B-shares of Aeronautical Radio of Thailand Limited to becomemember airline for availing advantageous rate on air navigation charges in Thailand.

As on March 31 2019 the Company has also provided loan of (i) Rs_249.44 million toSpiceJet Merchandise Private Limited; (ii) Rs_54.40 million to SpiceJet Technic PrivateLimited; and (iii) Rs_238.70 million to Canvin Real Estate Private Limited. Members mayrefer note 47 of the standalone financial statement of the Company for financial yearended March 31 2019 for more details.

11. Subsidiaries

As on March 31 2019 following are the subsidiaries of the Company:

S. No. Name Business Activity
(a) SpiceJet Merchandise Private Limited Business of consumer merchandise and goods through various channels
(b) SpiceJet Technic Private Limited Engineering related service including but not limited to maintenance repair and overhaul services of aircraft and its parts.
(c) Canvin Real Estate Private Limited Real estate business

In order to ensure governance of material subsidiary companies the Board of Directorsof the Company has adopted the policy and procedures for determining ‘material'subsidiary companies in accordance with the provisions of the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and the same is available on the websiteof the Company at www.spicejet.com under the “Investor section”. As per Section129(3) of the Companies Act 2013 where the Company has one or more subsidiaries itshall in addition to its financial statements prepare a consolidated financial statementof the Company and of all the subsidiaries in the same form and manner as that of its ownand also attach along with its financial statement a separate statement containing thesalient features of the financial statement of its subsidiaries. Accordingly theconsolidated financial statement of the Company and all of its subsidiaries are preparedin accordance with the Companies (Accounts) Rules 2014 and form part of the AnnualReport.

Further a statement containing the salient features of the financial statements of allsubsidiaries in the prescribed Form AOC-1 is annexed as “Annexure - B” to thisreport. This statement also provides the details of the performance and financial positionof each subsidiary.

12. Number of Meetings of the Board

During the financial year ended March 31 2019 five (5) board meeting were held thedetails of which are given in the Corporate Governance Report that forms part of thisreport. The intervening gap between any two meetings was within the period prescribedunder the Companies Act 2013.

13. Directors' Responsibility Statement

In terms of Section 134(5) of the Companies Act 2013 in relation to the auditedfinancial statements of the Company for year ended March 31 2019 the Directors of yourCompany hereby state that: (a) in the preparation of the annual accounts the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures if any; (b) the Directors have selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period; (c) theDirectors have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities; (d)the Directors have prepared the Annual Accounts of the Company on a ‘going concern'basis; (e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and (f) the Directors have devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.

14. Corporate Governance and Management Discussion and Analysis

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a detailed report on the Management Discussion and Analysis andCorporate Governance along with Practicing Company Secretary's Certificate regardingcompliance of conditions of corporate governance forms an integral part of this report.

15. Particulars of Employees

The Company's goal is to stay invested in employee's growth provide them withdevelopment opportunities recognise their efforts and enable them to absorb our valuesystem. The Company focus on the workplace that promotes a transparent and participativeorganisation culture.

The Company has constituted an internal committee to consider and resolve all sexualharassment complaints reported by women and has also adopted a policy as per therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. All employees (permanent contractual temporary trainees) arecovered under this policy. During the financial year 2018-19 ten complaints were receivedand disposed off under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

The ratio of the remuneration of each Director to the median remuneration of theemployees of the Company and other details in terms of Section 197(12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are forming part of this report and annexed as “Annexure -C”. The statement containing particulars of employees as required under Section197(12) of the Companies Act 2013 read with Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 forms part of this report. In terms ofthe provisions of Section 136(1) of the Companies Act 2013 read with the rules madethereunder this report is being sent to all members of the Company excluding the saidannexure. Any member interested in obtaining a copy of the annexure may write to theCompany.

16. Employees Stock Option Scheme

The members of the Company at its 33rd Annual General Meeting held onNovember 27 2017 approved “SpiceJet Employee Stock Option Scheme - 2017” forgrant of ten million stock options representing ten million equity shares of Rs_10 each.No grant has been made under this scheme during the year under review.

There has been no material variation in the terms of the options granted under thisscheme and this scheme is in compliance with the SEBI (Share Based Employee Benefits)Regulations 2014. The details of this scheme including terms of reference andrequirement specified under Regulation 14 of the SEBI (Share Based Employee Benefits)Regulations 2014 is available on the website of the Company at www.spicejet.com under the“Investor section”.

17. Corporate Social Responsibility

We believe that growth and development are effective only when they result in wideraccess to opportunities and benefit a broader section of society. With an objective ofsocioeconomic development in India the Board of Directors of the Company has adopted aCorporate Social Responsibility (“CSR”) Policy which is available on thewebsite of the Company at www.spicejet.com under the “Investor section”. TheCompany has also constituted CSR Committee comprising of Mr. Harsha Vardhana Singh asChairperson and Mr. Ajay Singh and Mrs. Shiwani Singh as Member which inter-alia monitorsthe Company's CSR Policy and recommend the amount of CSR expenditure. During the yearunder review the CSR Committee met once on February 11 2019 with necessary quorum beingpresent at the meeting.

Working in close harmony and partnering with various organisations who have donephenomenal work in this field the Company has undertaken several initiatives in variousareas including education destitute care and rehabilitation healthcare and ruraldevelopment in line with the CSR Policy and are in accordance with Schedule VII of theCompanies Act 2013. As per Rule 8 of the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 annual report on CSR activities is attached as “Annexure -D” and forms an integral part of this report.

18. Conservation of Energy and Technology Absorption

Conservation of Energy: The management is highly sensible of the criticality of theconservation of energy at all operational levels particularly of aviation turbine fuelwhich is leading source of energy for aviation activity. Adequate measures are taken toreduce energy consumption whenever possible by using energy efficient equipment andtechnology infusion. These measures among other includes maintenance of engine andairframe flight planning training to operational staff regular analysis etc.

Technology absorption: The Company has used information technology comprehensively inits operations for more details please refer to Section 9 (Information Technology) ofManagement Discussion and Analysis.

19. Green Initiatives

The electronic copies of the Annual Report 2018-19 are sent to all members of theCompany whose email address are registered with the Company/Depository Participant(s). Formembers who have not registered their email address physical copies are sent in thepermitted mode. To support this green initiative and to receive all communications of theCompany on email members are requested to register their email addresses with M/s. KarvyFintech Private Limited (Registrar and Share Transfer Agent) if shares are held inphysical mode or with their depository participants if the holding is in electronic mode.

20. Statutory Auditors

(a) The Statutory Auditors of the Company M/s S.R. Batliboi & Associates LLPChartered Accountants (ICAI Firm Registration No: 101049W/E300004) was appointed bymembers of the Company at its Annual General Meeting held on December 26 2016 to holdoffice till the conclusion of 36th Annual General Meeting of the Companysubject to ratification of the appointment by the members of the Company at every AnnualGeneral Meeting. However the Companies (Amendment) Act 2017 read with notification datedMay 7 2018 issued by the Ministry of Corporate Affairs has removed the requirement ofratification of the appointment of Statutory Auditors at every Annual General Meeting bythe members of the Company.

(b) In accordance with Section 134(3)(f) of the Companies Act 2013 information andexplanations to various comments made by the Auditors in their Report to the members arementioned in the Notes to the Accounts which form part of the Balance Sheet for the yearended March 31 2019.

21. Secretarial Auditors

(a) Pursuant to the provisions of Section 204 of the Companies Act 2013 and theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board ofDirectors of the Company appointed Mr. Mahesh Kumar Gupta Practicing Company Secretary toundertake the Secretarial Audit of the Company for financial year ended on March 31 2019.The Report of the Secretarial Auditor is annexed as “Annexure - E” to thisreport.

In accordance with Section 134(3)(f) of the Companies Act 2013 response (wherevernecessary) to the observations in the Secretarial Audit Report are as under: Para 1 of theobservation: The Company inadvertently missed to file the corporate governance report forquarter ended June 30 2018 within the stipulated time. However the same was regularisedwith payment of penalty with the stock exchange. Para 2 of the observation: In view of theuncertainties involved in the matter management believes that the manner timing andother related aspects of adjustment of these amounts are currently not determinable.Based on their assessment and legal advice obtained management is of the view that anypossible consequential effects including penal consequences and any compounding thereofwill not have a material impact on the financial statements.

(b) In terms of Regulation 24A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 read with SEBI Circular dated February 8 2019 bearing no.CIR/CFD/CMD1/27/2019 the Secretarial Auditor has also issued a Secretarial ComplianceReport for the year ended March 31 2019.

22. Business Responsibility Report

Regulation 34 (2)(f) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 mandate the inclusion of Business Responsibility Report as part ofAnnual Report for top 500 listed entities based on market capitalisation. In compliancewith the said Regulation we have annexed the Business Responsibility Report for financialyear ended March 31 2019 as “Annexure - F”.

23. Foreign Exchange Earnings and Outgo

The details of Foreign Exchange earnings and outgo for the financial year ended March31 2019 are set out below:

Particulars Amount (Rs_in millions)
Foreign Exchange Earnings 12313
Foreign Exchange Outgo 32645

24. Risk Management Policy and adequacy of Internal Financial Controls

Your Company recognises that risk is an integral part of business and is committed tomanaging the risks in a proactive and efficient manner. The Company has established aframework to actively manage all the material risks faced by the Company in a mannerconsistent with the company's strategy. This covers all business risks including strategicrisk operational risks including fraud and cyber risks foreign exchange risk fuel pricerisk and financial risks. The Company has laid down procedures to inform Board ofDirectors about risk assessment and minimisation procedures. These procedures areperiodically reviewed to ensure that executive management is controlling risks throughproperly defined framework. The system of risk assessment and follow-up procedure is inplace and considering its increased operations the Company continues to reassess its riskmanagement plan.

The Company has also constituted a Risk Management Committee for monitoring andreviewing risk management plan of the Company.

25. Acknowledgement

We thank our valued customers partners vendors investors and bankers for theircontinued confidence and support during the year and playing a significant role in thecontinued business excellence achieved by the Company. We place on record our appreciationof the contribution made by our employees at all fronts. Our consistent growth was madepossible by their hard work solidarity cooperation and support.

We thank governments of various countries where we have our operations. We thank theGovernment of India particularly the Ministry of Civil Aviation Ministry of CorporateAffairs Ministry of Finance Directorate General of Civil Aviation and other regulatoryauthorities for their cooperation support and guidance.

For and on behalf of the Board
Sd/-
Place: Gurgaon Ajay Singh
Date : August 9 2019 Chairman & Managing Director