SpiceJet Financial Woes: Airline Admits to Rs 355 Crore in Unpaid PF and Tax Dues
SpiceJet, the budget airline based in Gurugram, disclosed alarming financial information regarding its unpaid statutory dues. The airline has admitted to not paying approximately Rs 355 crore in Provident Fund (PF) contributions and tax deductions at source (TDS) since April 2020. This revelation raises serious concerns about the airline’s financial health and operational sustainability.
Main Points
Overview of Unpaid Dues
According to SpiceJet’s preliminary placement document filed with the Bombay Stock Exchange (BSE), the total unpaid statutory dues amount to nearly Rs 427 crore. This figure includes Rs 135.3 crore owed in PF contributions and Rs 219.8 crore in TDS deducted from employees’ salaries. The airline attributes these defaults to a “constrained financial position” that has persisted since the onset of the COVID-19 pandemic.
The airline’s financial difficulties have led to significant operational challenges, including grounding more than half of its fleet. As of June 30, 2024, out of a total of 64 aircraft, 36 are reported as grounded due to alleged defaults in payments to lessors and maintenance issues stemming from financial constraints.
Financial Breakdown
The breakdown of SpiceJet’s unpaid dues is as follows:
- TDS Dues: Rs 219.8 crore
- PF Contributions: Rs 135.3 crore
- Total Unpaid Statutory Dues: Rs 427 crore
Additionally, SpiceJet has acknowledged owing Rs 118.9 crore to its employees as of September 15, 2024. The airline plans to utilize funds raised through a qualified institutional placement (QIP) to address these outstanding liabilities.
Legal Implications
The failure to remit TDS and GST is not just a financial oversight; it carries serious legal consequences. Legal experts have indicated that non-payment of GST could be treated as a criminal offense since this tax has already been collected from customers but not remitted to the government. Penalties may include imprisonment for a minimum of 60 days for responsible parties.
Moreover, under the Employees’ Provident Funds and Miscellaneous Provisions Act, failure to pay PF dues can lead to severe penalties, including interest on delayed payments and potential imprisonment for company officials responsible for the defaults.
Operational Impact
SpiceJet’s operational capacity has been severely impacted by its financial issues. The grounding of aircraft not only affects flight schedules but also diminishes the airline’s market share and customer trust. The airline has stated that its ability to service existing debts and achieve future profitability is closely tied to increasing its fleet size and passenger volumes.
Future Plans
To address these pressing financial challenges, SpiceJet is looking to raise up to Rs 3,000 crore through the QIP process. The funds raised will be allocated as follows:
- Clearing Statutory Dues: Rs 601.5 crore
- Settling Liabilities with Lessors and Vendors: Rs 750 crore
- Maintaining and “Ungrounding” Aircraft: Rs 410 crore
This capital raise is seen as critical for the airline’s survival and recovery strategy.
Market Reaction
Following the announcement, SpiceJet’s shares experienced a decline of approximately 5.23%, closing at Rs 73.72 on the BSE. This drop reflects investor concerns about the airline’s financial stability and future prospects.
Stakeholder Responses
SpiceJet’s management has assured stakeholders that they are committed to transparency regarding their financial situation. A spokesperson stated that while there have been delays in payments due to financial constraints, there is a firm commitment to clear all dues as soon as possible.
Ajay Singh, the promoter of SpiceJet, holds a significant stake in the company and is likely under pressure to navigate these turbulent times effectively.
