Banks may consider forensic audit of Go First accounts

On June 15, NCLT granted approval to the Committee of Creditors (CoC) for the appointment of Shailendra Ajmera of EY as the resolution professional (RP) for the debt-ridden airline. Earlier, the NCLT had appointed Alvarez and Marsal-backed Abhilash Lal as the interim resolution professional (IRP) on the recommendation of the airline.

The airline’s total debt outstanding to lenders, including Bank of Baroda, Central Bank of India, IDBI Bank and Deutsche Bank, stood at Rs 6,521 crore as on April 28, 2023. Banks had burnt their fingers when Kingfisher Air and Jet Airways collapsed with huge debt.

“Now that the resolution professional has been appointed, he will conduct a transaction audit (of Go First accounts), which is mandatory. Once the transaction audit is completed, lenders could go for a forensic audit of the airline’s book. Lenders are likely to take a call on this in a week’s time,” a source said.

Go First did not reply to an email sent to it seeking comments.

The purpose of commissioning transaction and forensic audits of accounts of a firm or an individual is to check the end-use of loans given to them. These audits help lenders detect fraud, misreporting and diversion of funds by borrowers if there is any.

Lenders are likely to classify the airline as a non-performing asset (NPA) in the next quarter of this fiscal, said a person familiar with the matter.

Sources said the newly-appointed resolution professional is likely to soon submit a fresh revival plan for the airline to the aviation regulator Directorate General of Civil Aviation (DGCA), and along with that to the CoC. “The RP will assess the funding requirement of the airline. He will place a request to the CoC, who will then decide on the interim funding, depending upon the viability of the revival plan,” a person close to the development said.

Earlier, Lal had submitted a revival plan to the DGCA under which the grounded airline had proposed to restart operations with 26 planes and 152 daily flights, a PTI report said. As part of the plan, the airline had also sought funding of Rs 400 crore from its lenders to resume operations.

Last month, the Central Bank of India, which is the consortium leader, said that its outstanding exposure to Go First Airline as on March 31, 2023, was Rs 1,987 crore, including Rs 682 crore sanctioned under the emergency line of credit guaranteed scheme (ECLGS) by the government.

Bank of Baroda’s exposure to the airline is close to Rs 1,300 crore. The bank also provided funding to the airline under the scheme while IDBI Bank’s outstanding loan is around Rs 50 crore.

The airline has an undrawn credit limit under ECLGS which it wants to utilise as part of the interim funding. However, banks are unlikely to release any funds under the scheme as the National Credit Guarantee Trustee Company (NCGTC) may not provide any credit guarantee, sources said.

Under ECLGS, NCGTC provides 100 per cent guarantee coverage to banks and NBFCs on credit extended to business enterprises or MSMEs.

The aviation industry experts believe that the next ten days are crucial for the revival of grounded Go First, which suspended its operations on May 3. Last Thursday, the airline said it extended the cancellation of flights till June 19 due to operational reasons. “It would be difficult to revive the airline unless a concrete revival plan comes up in the next seven or ten days,” said an aviation sector analyst.

The first meeting of the COC after the airline was admitted to the bankruptcy court, was held on June 9. In the meeting, COC had proposed to replace Lal with Ajmera as the RP. The NCLT had given its nod for the appointment of Ajmera to COC on June 15.

The COC has also appointed J Sagar Associates as its legal advisor in place of Trilegal, sources said.