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DIRECTOR'S REPORT

Spicejet Ltd.

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Market Cap. (₹) 7580.44 Cr. P/BV -21.66 Book Value (₹) -5.84
52 Week High/Low (₹) 153/121 FV/ML 10/1 P/E(X) 0.00
Bookclosure 29/11/2018 EPS (₹) 0.00 Div Yield (%) 0.00
Year End :2018-03 

Dear Members,

The Directors have pleasure in presenting the 34th Annual Report together with the Audited Financial Statements of your Company for the year ended March 31, 2018.

1. FINANCIAL STATEMENTS AND RESULTS

The Company’s performance during the year ended March 31, 2018 compared to the previous financial year, is summarised below:

(Amount in Rs. million)

Particulars

Standalone

Consolidated

March 31, 2018

March 31, 2017

March 31, 2018

March 31, 2017

TOTAL REVENUE

78,793.66

62,714.00

78,838.09

62,714.96

Expenses

Operating Expenses

55,565.55

44,325.13

55,565.55

44,325.17

Cost of inventory consumed

-

-

32.11

0.26

Employee Benefit Expenses

8,625.67

6,735.40

8,616.92

6,738.23

Selling Expenses

2,216.60

2,092.90

2,226.36

2,097.79

Other Expenses

4,015.84

3,326.42

4,085.83

3,347.27

Earnings before interest, tax, depreciation and amortization

8,370.00

6,234.15

8,311.32

6,206.24

Depreciation and amortisation expense

(2,312.01)

(1,986.05)

(2,313.18)

(1,986.14)

Interest income on bank deposits

530.42

324.04

497.22

316.96

Finance Cost

(921.90)

(650.40)

(923.30)

(650.40)

Profit/ (Loss) before taxation and extraordinary items

5,666.51

3,921.74

5,572.06

3,886.66

Tax Expenses

-

-

-

-

Extraordinary items

-

385.54

-

385.54

Profit/ (Loss) after taxation

5,666.51

4,307.28

5,572.06

4,272.20

Profit/ (Loss) brought Forward

(22,031.51)

(26,317.57)

(22,066.59)

(26,317.57)

Depreciation expense adjusted against reserves

-

-

-

-

Profit/ (Loss) for the year

5,666.51

4,307.28

5,572.06

4,272.20

Other comprehensive income

2.34

(21.22)

2.34

(21.22)

Amount transferred to Balance Sheet

(16,362.66)

(22,031.51)

(16,492.19)

(22,066.59)

2. STATE OF AFFAIRS OF THE COMPANY AND MATERIAL DEVELOPMENT

The Company has recorded another steady year of growth and profitability, despite performing in a highly competitive environment in the aviation sector. Your Company has added 36 new routes during the year under review.

The Company’s total income on standalone basis is Rs. 78,793.66 compared to previous year’s Rs. 62,714.00 registering a steady growth of 25.64 % on a year over year basis. The Company has earned standalone net profit of Rs. 5,666.51.

The Company completed its thirteenth year of operation on May 23, 2018 wherein it continued to focus on consolidating its operations on key routes. As at the end of the financial year the Company maintained a fleet size to 60 aircraft with which it operated approximately 410 flights per day covering 45 domestic and 7 international destinations. The Company has been awarded as India’s ‘Best Domestic Airline’ at the prestigious Wings India Awards for Excellence in the Aviation Sector organised by the Ministry of Civil Aviation, Government of India and FICCI in March, 2018.

There was no change in nature of the business of the Company, during the year under review.

The Company has signed an agreement with CFM International for purchase of LEAP-1B engines to power a total of 155 Boeing 737 MAX airplanes, along with spare engines to support the fleet. The Company has also signed a ten year Rate per Flight Hour (RPFH) agreement with CFM Services that covers all LEAP-1B engines powering 737 MAX airplanes.

Your Company has been awarded 17 proposals and 20 new sectors under the second round of bidding for the Government of India’s Regional Connectivity Scheme. Out of these 20, 15 will cater to unserved markets of Kannur (Kerala), Darbhanga (Bihar), Ozar (Nashik), Pakyong (Sikkim), Kishangarh (Rajasthan), Lilabari (Assam), Thanjavur (Tamil Nadu), Bokaro (Jharkhand) and Solapur (Maharashtra) whereas 5 will be for underserved markets of Hubli (Karnataka) and Jaisalmer (Rajasthan). The Company is the largest and most organised regional player in the country with a fleet of 24 Bombardier Q400 aircraft.

During October 2018, the Company inducted first Boeing 737 MAX aircraft which is a major milestone in Company’s turnaround. These new aircraft will enable the Company to open new routes, while reducing fuel and engineering costs, as well as emissions. The 737 MAX aircraft will dramatically reduce noise pollution and greenhouse gas emissions. Passengers will benefit from a large number of premium seats and, for the first time in India, broadband internet on board.

Members are also requested to refer to Section 3 (Developments at SpiceJet) of Management Discussion and Analysis.

Dispute with erstwhile promoters:

The Company had in earlier financial years, received amounts aggregating Rs. 5,790.9 million from its erstwhile promoters as advance money towards proposed allotment of certain securities (189,091,378 share warrants and 3,750,000 non-convertible cumulative redeemable preference shares, issuable based on approvals 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 was required to secure an amount of Rs. 3,290.9 million through a bank guarantee in favour of the Registrar General of the Court (“Registrar”) and to deposit the balance amount of Rs. 2,500.0 million with the Registrar. The Company has complied with these requirements as at March 31, 2018.

The parties to the aforementioned litigation concurrently initiated arbitration proceedings before a three member arbitral tribunal (the “Tribunal”), and the Tribunal pronounced its final award on July 20, 2018 (the “Award”). The management is examining the various aspects of the Award, including the manner, timing and other related matters, and other options available to the Company In terms of the Award, the Company is required to (a) refund an amount of approximately Rs. 3,082.2 million to the counterparty, (b) explore the possibility of allotting non-convertible cumulative redeemable preference shares in respect of approximately Rs. 2,708.7 million, failing which, refund such amount to the counterparty, and (c) pay interest calculated to be RS.924.7 million (being interest on the amount stated under (a) above, in terms of the Award). Further, the Tribunal has also allowed the counter claim of RS.290 million in favour of the Company in addition to adjusting the amount of RS.1,000 million not brought in by the erstwhile promoters.

3. BOARD OF DIRECTORS

a) In terms of the provision of Section 152(6) of the Companies Act, 2013, Mr. Ajay Singh is liable to retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible, has offered himself for re-appointment.

b) The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.

c) Mr. R. Sasiprabhu (Independent Director) has resigned from the directorship of the Company with effect from May 9, 2018.

4. DIVIDEND

The Board of Directors have not recommended any dividend for the financial year 2017-18. The Dividend Distribution Policy of the Company, as approved by the Board of Directors of the Company, is available on the website of the Company at www.spicejet.com in ‘Investors’ section.

5. TRANSFER TO RESERVES

The Company has made no transfers to reserves during the financial year 2017-18.

6. PUBLIC DEPOSITS

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013. Accordingly no disclosure or reporting is required in respect of details relating to deposits covered under this Chapter.

7. EXTRACT OF ANNUAL RETURN

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

8. PARTICULARS OF CONTRACTS OR ARRANGEMENT MADE WITH RELATED PARTIES

All related party transactions that were entered into during the financial year under review were on arm’s length basis and were in the ordinary course of business. All Related Party Transactions have been placed before the Audit Committee and Board for their approval.

No Material Related Party Transactions, i.e. transactions exceeding ten percent of the annual consolidated turnover of the Company as per the last audited financial statements, were entered during this financial year by the Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) (h) of the Companies Act, 2013 in Form AOC-2 is not applicable.

9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

The Company has not granted any loan, given guarantee or security or made investment under the provisions of Section 186 of the Companies Act, 2013 during the financial year under review except as follows:

a) As on March 31, 2018, the Company has made an investment of Rs. 0.10 million each in equity shares of its wholly owned subsidiaries namely SpiceJet Merchandise Private Limited, SpiceJet Technic Private Limited and Canvin Real Estate Private Limited; and

b) As on March 31, 2018, the Company has an investment of Rs. 0.24 million in class B-shares of Aeronautical Radio of Thailand Limited to become member airline for availing advantageous rate on air navigation charges in Thailand.

As on March 31, 2018, the Company has also provided loan of (a) Rs. 249.44 million to SpiceJet Merchandise Private Limited, (b) Rs. 12.20 million to SpiceJet Technic Private Limited, and (c) Rs. 236.00 million to Canvin Real Estate Private Limited. Members may refer note 47 of the standalone financial statement of the Company for financial year ended March 31, 2018 for more details.

10. SUBSIDIARIES

As on date of this report following are the subsidiaries of the Company:

a) SpiceJet Merchandise Private Limited which is engaged in the business of consumer merchandise and goods that includes electronic items, readymade apparels, accessories etc. through various channels;

b) SpiceJet Technic Private Limited which is engaged in engineering related service; and

c) Canvin Real Estate Private Limited which is engaged in real estate business.

As per Section 129(3) of the Companies Act, 2013, where the Company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the Company and of all the subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries. Accordingly, the consolidated financial statement of the Company and all of its subsidiaries are prepared in accordance with the Companies (Accounts) Rules, 2014 and form part of the Annual Report.

Further, a statement containing the salient features of the financial statements of all subsidiaries in the prescribed Form AOC-1, is annexed as “Annexure - B” to this Report. This statement also provides the details of the performance and financial position of each subsidiary.

In order to ensure governance of material subsidiary companies, the Board of Directors of the Company has adopted the policy and procedures for determining ‘material’ subsidiary companies in accordance with the provisions of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.

11. NUMBER OF MEETINGS OF THE BOARD

During the financial year ended March 31, 2018, six (6) board meeting (including adjourned meeting) were held, the details of which are given in the Corporate Governance Report that forms part of this Report. The intervening gap between any two meetings was within the period prescribed under the Companies Act, 2013.

12. DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Companies Act, 2013, in relation to the Audited Financial Statements of the Company for year ended March 31, 2018, the Directors of your Company hereby state that:

a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets 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 the Company and that such internal financial controls are adequate and were operating effectively; and

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

13. CORPORATE GOVERNANCE

Pursuant to Regulation 34(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Corporate Governance Report alongwith Practicing Company Secretary’s Certificate regarding compliance of conditions of Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 forms an integral part of this Report.

14. MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of the provisions of Regulation 34 of the SEBI (Listing Regulations and Disclosure Requirements) Regulations, 2015 is provided as a separate chapter in the Annual Report.

15. PARTICULARS OF EMPLOYEES

We believe in building and sustaining a strong culture of positive working relationships between employees and recognize that the success of the Company is deeply embedded in the success of its human capital. The Company had 8,447 employees as on March 31, 2018 (previous year 6,902).

Information as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules, 2014 forms part of this Report. Considering the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report, excluding the aforesaid information, is being sent to the members of the Company and others entitled thereto. Members who are interested in obtaining these particulars may write to the Company Secretary at the Registered Office of the Company. The aforesaid information is also available for inspection at the Registered Office of the Company during working hours, up to the date of the Annual General Meeting.

16. EMPLOYEES STOCK OPTION SCHEME

Scheme of 2017:

The Company has formulated SpiceJet Employee Stock Option Scheme - 2017 for the purpose of administering the issue of stock options to its eligible employees including that of its subsidiary companies. During the financial year ended March 31, 2018, the members of the Company approved the issuance of ten million stock options representing ten million equity shares of Rs. 10 each under this scheme at 33rd Annual General Meeting held on November 27, 2017.

There has been no material variation in the terms of the options granted under this scheme and this scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014. The details of this scheme including terms of reference, and requirement 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 in ‘Investors’ section.

Scheme of 2007:

The Company also had an Employee Stock Option Scheme - 2007 that provided for grant of stock options to qualifying employees under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. This scheme expired on September 11, 2016 which was the last date for exercise of options vested to the employees. All the unexercised options have been forfeited in this financial year.

17. STATUTORY AUDITORS

a) The Statutory Auditors of the Company, M/s S.R. Batliboi & Associates LLP, Chartered Accountants, was appointed by members of the Company at its Annual General Meeting held on December 26, 2016 to hold office till the conclusion of 36th Annual General Meeting of the Company subject to ratification of the appointment by the members of the Company at every Annual General Meeting. However, the Companies (Amendment) Act, 2017 read with notification dated May 7, 2018, issued by the Ministry of Corporate Affairs, has removed the requirement of ratification of the appointment Statutory Auditors at every Annual General Meeting by the members of the Company.

b) In accordance with Section 134(3)(f) of the Companies Act, 2013, information and explanations to various comments made by the Auditors in their Report to the members are mentioned in the Notes to the Accounts, which form part of the Balance Sheet for the year ended March 31, 2018.

18. SECRETARIAL AUDIT

a) Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company appointed Mr. Mahesh Kumar Gupta, Practicing Company Secretary to undertake the Secretarial Audit of the Company for financial year ended on March 31, 2018. The Report of the Secretarial Auditor is annexed as “Annexure - C” to this Report.

b) In accordance with Section 134(3)(f) of the Companies Act, 2013, response (wherever necessary) to the observations in the Secretarial Audit Report are as under:

Para 2 of the observation: In view of the uncertainties involved in the matter, management believes that the manner, timing and other 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 any possible consequential effects, including penal consequences and any compounding thereof, will not have a material impact on the financial statements.

19. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, the Board of Directors of the Company has adopted a Corporate Social Responsibility (“CSR”) Policy which is available on the website of the Company at www.spicejet.com in ‘Investors’ section. The objective of this CSR Policy is to pro-actively support meaningful socio-economic development in India and enable a larger number of people to participate in and benefit from India’s economic progress.

The Company also have a CSR Committee of its Board of Directors comprising of Dr. Harsha Vardhana Singh as Chairman and Mr. Ajay Singh and Mrs. Shiwani Singh as Member which inter-alia monitors the Company’s CSR Policy and recommend the amount of CSR expenditure.

The Company has just embarked on the journey of having average net profit for last three financial year and therefore this is the first financial year wherein the Company is required to contribute towards CSR activities. Working in close harmony and partnering with various organisations who have done phenomenal work in this field, we undertook several initiatives during the year underlying our commitment of helping out in every way we could. As per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, annual report on CSR activities is attached as “Annexure - D” and forms an integral part of this Report.

Detailed particulars of our CSR activities are given under Principle 8 of Business Responsibility Report for financial year ended March 31, 2018 attached herewith as “Annexure - E”.

20. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Conservation of Energy: The management is highly sensible of the criticality of the conservation of energy at all operational levels particularly of aviation turbine fuel which is leading source of energy for aviation activity. Adequate measures are taken to reduce energy consumption whenever possible by using energy efficient equipment and technology infusion. These measures among other includes maintenance of engine and airframe, flight planning, training to operational staff, regular analysis etc.

Further, the Company successfully operated its Bombardier Q400 aircraft powered by BioJet Fuel and intends to explore operations using a blend of 75% of aviation turbine fuel (ATF) and 25% of BioJet fuel, which has the potential of reducing carbon footprint by 15%. The airline has also initiated new food packaging which will go a long way in reducing the dependence on plastic and therefore will promote a culture of recycling. Strategic use of trays will be used in place of the current packaging. These trays are reusable and also recyclable, which makes them extremely environment friendly.

Technology absorption: The Company has used information technology comprehensively in its operations, for more details please refer to Section 9 (Information Technology) of Management Discussion and Analysis.

21. GREEN INITIATIVES

The electronic copies of the Annual Report 2017-18 are sent to all members of the Company whose email address are registered with the Company/Depository Participant(s). For members who have not registered their email address, physical copies are sent in the permitted mode. To support this ‘Green Initiative’ and to receive all communications of the Company on email, members are requested to register their email addresses with M/s. Karvy Computershare Private Limited (Registrar and Share Transfer Agent), if shares are held in physical mode or with their depository participants, if the holding is in electronic mode.

22. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report for financial year ended March 31, 2018 as per Regulation 34 (2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 dealing with the various initiatives taken by your Company on the environmental, social and governance front forms an integral part of this Report and annexed as “Annexure - E”.

23. POLICY ON PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company has a Sexual Harassment at Workplace (Prevention, Prohibition and Redressal) Policy in line with the requirements of the Sexual Harassment of Women at the workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the financial year 2017-18, eight complaints were received and disposed of under the Sexual Harassment of Women at the workplace (Prevention, Prohibition & Redressal) Act, 2013.

24. FOREIGN EXCHANGE EARNINGS & OUTGO

The details of Foreign Exchange earnings and outgo for the financial year ended March 31, 2018 are set out below:

25. RISK MANAGEMENT POLICY AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company has laid down procedures to inform Board members about risk assessment and minimization procedures with regard to safety of its operations. These procedures are periodically reviewed to ensure that executive management is controlling risks through properly defined framework.

The system of risk assessment and follow-up procedure is in place and considering its increased operations the Company continues to reassess its risk management plan.

26. ACKNOWLEDGEMENT

Your Directors take this opportunity to express their deep and sincere gratitude to the customers of the Company for their confidence and patronage, as well as to the Directorate General of Civil Aviation, the Government of India, particularly the Ministry of Civil Aviation and other Regulatory Authorities for their cooperation, support and guidance. Your Directors would like to express a deep sense of appreciation for the commitment shown by the employees in supporting the Company in its continued robust performance on all fronts. The Directors would also like to thank all our valued partners, vendors and stakeholders who have played a significant role in the continued business excellence achieved by the Company.

For and on behalf of the Board

Sd/-

Place: Gurugram Ajay Singh

Date : October 30, 2018 Chairman & Managing Director

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