Kannur Airport loss doubles y-o-y to Rs185 cr for FY21

Kannur Airport loss doubles y-o-y to Rs185 cr for FY21

BY CL Jose

Auditors flag material weaknesses in internal financial controls

KANNUR/May 17-2022: Kannur International Airport Ltd (KIAL) has closed yet another financial year in ‘red’, though no surprises, as it reported a net loss of Rs185 crore for 2020-21 (FY21) against a loss of Rs95.04 crore for the previous year.

Thus, the company has so far accumulated losses to the tune of Rs324.54 crore as of March 31, 2021.

The accumulated losses have already eaten into KIAL’s paid-up capital at Rs1338.12 crore to the extent of 25 per cent, indicating the urgency of the company to break even at the earliest possible.

The revenue for the COVID-hit FY21 had fallen drastically by 61 per cent, from Rs115.9 crore in FY21 to Rs44.77 crore.

The largest expense incurred by KIAL during FY21 was its finance cost at Rs89.05 crore on account of its borrowings (as of March 31, 2021) to the tune of Rs951.67 crore.

The finance cost or the interest expenses were double the revenue KIAL generated during the financial year. The company has already defaulted in repayment of interest to the tune of Rs28 crore as of March 31, 2021

The total expenses during the year were to the tune of Rs228.76 crore against Rs226.17 crore, KIAL incurred during the previous year.

Auditors flag deficiencies in accounts

Even as a stand-off between the Ministry of Corporate Affairs (MCA) and KIAL looms large on the mandate to audit the company’s accounts, the current auditors, Deloitte Haskins & Sells, has raised serious shortcomings in the company’s financials for 2020-21 as they have also done in the financials of the previous year.

MCA contends that KIAL is a government company as defined under the Companies Act, 2013, and hence the company’s auditors need to be appointed by the Comptroller and Auditor General of India (C&AG) under Section 139(5) of the Act.

Kerala Government, the largest shareholder with 39.23 per cent, has argued that it alone doesn’t hold majority stake in the company though the combined shareholding along with the government-related companies does so.

Shareholding

While Kerala Government alone holds 39.23 per cent, Bharat Petroleum Corporation Ltd (BPCL) holds 16.20 per cent in KIAL.

Other government related shareholders include SBI (1.12 per cent), Kerala State Industrial Development Corporation (0.75 per cent), Kerala State Beverages Corporation (0.60 per cent), etc.

Airport Authority of India (AAI) held 7.47 per cent shares in the company during 2020-21 against 16.20 at the beginning of the previous year.

MA Yusaffali, at 8.59 per cent, is the third largest shareholder in the company after state government and BPCL. Incidentally, Yusaffali is the second largest shareholder in Cochin International Airport Ltd (CIAL). Federal Bank as well as two  credit societies from Kannur too, hold stakes in the airport company.

Adverse Opinion

The auditors have drawn attention to several material weaknesses in the company’s internal financial controls over financial reporting as at March 31, 2021. “The company did not have an appropriate internal control system for ensuring compliance with the applicable accounting standards and generally accepted accounting principles,” the auditors said.

A ‘material weakness’ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.


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