State Bank of India (SBI), the lead banker to the debt-ridden Jet Airways, has mandated consultancy firm EY to conduct a forensic audit on the Indian carrier’s accounts from financial year 2014 till March 2018, according to media reports.
The forensic audit was ordered after Jet Airways approached SBI with a debt-restructuring proposal, which also envisages request for additional funding to tide over the airline’s financial crisis.
When contacted, the official spokesman of SBI told Arabian Business that the bank does not comment on matters related to individual accounts.
EY and Jet Airways also declined to comment when contacted.
Forensic audits are generally ordered to identify potential red flags in a company’s accounts.
Banking sources, however, said forensic audits are also conducted when companies approach banks for restructuring of their existing loans, with requests for additional funding.
Jet Airways has held talks with its existing partner, Abu Dhabi-based Etihad Airways for an equity-cum-soft-loan deal, under which the latter was offered to increase its stake from the existing 24 per cent to 49 percent.
Etihad Airways has reportedly offered to guarantee loans worth $150 million which Jet Airways is seeking to keep the airline operational.
Airline industry sources said SBI’s reported move for a forensic audit on Jet Airways’ accounts in the last 4 financial years could cast a shadow over the ailing airline’s efforts to rope in potential investors to tide over its financial crisis.
“Negotiations for stake sale generally tend to slow down in the event of the target company’s banks ordering a probe into the books of it to detect any probable wrong-doings on the part of the company’s management,” an industry source, who did not want to be identified, said.
Potential investors may wait or prolong the negotiations until the forensic audit report comes out.
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