Blackrock flags concern about SpiceJet’s accounting practices

As per a news report by Mint newspaper, Blackrock (US based large fund manager) had highlighted accounting irregularities at SpiceJet in December 2021.

Key points to note:

  • Blackrock had raised the issue of accounting irregularities at the time of rejecting re-appointment of Shivani Singh (wife of the promoter CMD, Ajay Singh) as Director. Blackrock rejected the reappointment as Shivani is also part of the Audit Committee and hence bears accountability towards the accounting irregularities.
  • The exact details on Blackrock’s accounting concerns are unavailable.
  • There was a qualification by auditor on advance recognition of certain claims from Boeing during the year ended March 2021, however whether that was the only issue for Blackrock, is unclear.
  • Blackrock had also voted against adoption of financial statements in December 2021.
  • Other large investors had also voted against both these resolutions. However, as almost 60% of the SpiceJet is owned by promoters and balance is largely owned by retail (about 38.6%), both the resolutions were passed.
  • SpiceJet as expected has rubbished the accounting irregularities issue.

SpiceJet’s stock has been one of the significant under performer over last many years. It’s market cap currently stands at only Rs 3,600 crore compared with Indigo’s Rs 85,000 crore.

Institutional investors have shunned Company’s stock over the last three years. Their stake declined from 12% to 2% during this period. Naturally retail picked up this stake gladly.

Whether Blackrock had genuine concerns or it picked up one specific auditor qualification to vent out it’s frustration of stock’s under performance is difficult to comment upon.

It does seem that Company is not much bothered and is focused on try surviving on it’s own. I think, under current circumstances that may be fine.

However, these kind of issues are normally not easily forgotten by the large investors. SpiceJet has to really turn around very well to stand any chance of gaining investors’ confidence back.

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