Kingfisher Airlines: Ratio Analysis

1. Liquidity Ratios
a. Current Ratio = Current Assets/ Current Liabilities

Current
Ratio

200
9

2010

2011

2012

2013

0.3

0.4

0.4

0.2

0.1

Current ratio of Kingfisher had declined steadily over the period. This was because the
current liabilities on the company were increasing at a rate much higher than the rate
of decrease of the current assets.
b. Quick Ratio = (Current Assets- Inventory)/ Current Liabilities

Quick
Ratio

200
9

2010

2011

2012

2013

0.53

0.66

0.32

0.16

0.08

Inventories on the companys balance sheet followed no particular trend, though

no major fluctuations either. Thus the quick ratio also followed the trend of current
ratio.
2. Profitability Ratios:
a. Gross Profit Ratio = (EBIT)/ Net Sales

Gross
Margin

200
9

2010

2011

2012

2013

-35.2

-18.7

-3.7

-39.3

-560.1

There was a net loss reported in all the 5 years making this ratio negative.
However we can see the abnormal loss in the year 2013 because of which the
company had to file for bankruptcy. This sudden increase of losses was due to
steep drop in revenues due to poor image of the company.
b. Net profit ratio = PAT/ Net Sales

Net
Margin

200
9

2010

2011

2012

2013

-30.7

-32.5

-16.5

-42.4

-857.9

Just like the gross margin, this ratio too is negative and the company ultimately went
bankrupt in 2013.
c. Return on Assets = NPAT/ Total Assets:
Year
Return on
Assets

200
9

2010

2011

2012

2013

-12

-7.3

3.5

-11.5

-101.9

This ratio is negative because the net profit was negative i.e. a loss. However, the
major jump in the ratio in the year 2013 was due to the heavy decline in the total
assets of the company. Since the company filed for bankruptcy in 2013, the banks
withheld a lot of assets of Kingfisher against their loans.
d. Return on Equity = (NPAT Dividends) / (Paid up capital + reserves and surplus)
200
9

2010

2011

2012

2013

Return on
Equity

Return on equity is not a valid ratio here since the company was running into losses
and hence its equity shareholders or the investors were not earning any rupee on
their shares.
3. Turnover Ratios
a. Inventory Turnover Ratio = 365/ (COGS/ Average Inventory)

Inventory
Turnover (in
days)

200
9

2010

2011

2012

2013

10

12

11

14

121

b. Collection Period = 365/ (Net Credit Sales/ Average Debtors)

200
9

2010

2011

2012

2013

19

23

26

12

15

Average Collection
Period

c. Fixed Assets Turnover ratio = Net Sales/ Total Assets

Net Assets
Turnover

200
9

2010

2011

2012

2013

0.8

0.7

0.8

0.6

0.2

This ratio measures the efficiency and profit making capacity of the company. A lower
ratio indicates underutilization of assets. This is exactly what happened in Kingfishers
case, revenues declined sharply because of the malpractices in the company and the
assets i.e. the airplanes remained unutilised.
4. Leverage Ratios:
a. Debt/Equity Ratio: Debt/ Equity

Debt Equity
Ratio

200
9

2010

2011

2012

2013

-1.3

-1.1

-1.8

-1

-0.5

This ratio is negative for Kingfisher because it had a negative equity capital. A
negative equity meant that Kingfisher had much more liabilities on its balance sheet
that assets. These liabilities were mainly in the form in current liabilities, i.e defaults in
payables like salaries, fuel charges etc. as debt started accumulating on Kingfishers
balance sheet, so did the equity but in the negative side. Hence, this ratio is not a
very appropriate measure to study Kingfisher.
b. Interest Coverage Ratio = EBIT/ Interest Expense

Interest Coverage
Ratio

200
9

2010

2011

2012

2013

-2.5

-0.8

-0.2

-1.7

-2

The lower the value of this ratio, the more is the company burdened with debt, and
that it does not earn enough profits to pay its interest expenses. This ratio is negative

because the company is in losses and also it is very high indicating that the company
is in debt at the same time not able to repay its liability.
5. Valuation Ratios:
a. Earnings per share = NPAT/ Number of Shares
b. P/E Ratio = Market Price per share/ Earnings per share
The above two ratios arent appropriate for the company since its shares are no longer
trading on the stock markets. The company filed for bankruptcy in the year 2013.
Common Size Income Statement:
In Millions of INR except Per Share
12 Months Ending
Sales
+ Other Operating Income
- Operating Expenses
Operating profit (loss)
- Interest Expense
- Foreign Exchange Losses (Gains)
- Net Non-Operating Losses (Gains)
Pretax Income
- Tax Provision
Income Before XO Items
- Extraordinary Loss Net of Tax
- Minority Interests
Net profit (loss)
- Total Cash Preferred Dividends
Net Inc Avail to Common Shareholders
Abnormal Losses (Gains)
Tax Effect on Abnormal Items
Normalized Income

FY 2009
03/31/2009
100.00%
-4.07%
136.14%
-40.21%
10.95%
-9.34%
7.84%
-49.66%
-10.43%
-39.23%
0.00%
0.00%
-39.23%
0.00%
-39.23%
0.00%
0.00%
0.00%
-39.23%

FY 2010
03/31/2010
100.00%
0.43%
122.03%
-21.60%
19.88%
0.99%
5.24%
-47.71%
-15.21%
-32.50%
0.00%
0.00%
-32.50%
0.00%
-32.50%
0.00%
0.00%
0.00%
-32.50%

FY 2011
03/31/2011
100.00%
2.03%
105.78%
-3.75%
17.95%
0.25%
2.44%
-24.40%
-7.92%
-16.48%
0.00%
0.00%
-16.48%
0.69%
-17.17%
0.00%
0.00%
0.00%
-17.17%

FY 2012
03/31/2012
100.00%
0.00%
145.29%
-45.29%
21.94%
-1.98%
-2.51%
-62.73%
-20.35%
-42.38%
0.00%
0.00%
-42.38%
0.94%
-43.31%
0.00%
0.00%
0.00%
-43.31%

FY 2013
03/31/2013
100.00%
0.00%
698.30%
-598.30%
272.85%
3.49%
-16.79%
-857.85%
0.00%
-857.85%
0.00%
0.00%
-857.85%
10.33%
-868.18%
0.00%
0.00%
0.00%
-868.18%

Source: Bloomberg

The most notable item here is the operating expenses. They inflated to 689% of
the revenue leading to heavy losses for the company. The revenues in the year
2013 declined sharply because of the number of issues going on in the company
at that time
Also the company kept delaying its interest payments to the banks which kept
accumulating till the year when the company filed for bankruptcy
Hence there were consistent losses faced by the company during the 5 year
period

Commonsize Balance Sheet:

In Millions of INR except Per Share
12 Months Ending
Assets
+ Cash & Near Cash Items
+ Short-Term Investments

FY 2009
03/31/200
9

FY 2010
03/31/201
0

FY 2011
03/31/201
1

FY 2012
03/31/201
2

FY 2013
03/31/201
3

2.29%
1.63%

2.72%
0.00

1.07%
0.00%

0.54%
0.00%

0.37%
0.00%

+ Accounts & Notes Receivable

+ Inventories
+ Other Current Assets
Total Current Assets
+ LT Investments & LT Receivables
+ Net Fixed Assets
+ Gross Fixed Assets
- Accumulated Depreciation
+ Other Long-Term Assets
Total Long-Term Assets
Total Assets

3.06%
1.96%
19.15%
28.08%
0.00%
42.26%
46.28%
4.02%
29.66%
71.92%
100.00%

Liabilities & Shareholders' Equity

+ Accounts Payable
+ Short-Term Borrowings
+ Other Short-Term Liabilities
Total Current Liabilities
+ Long-Term Borrowings
+ Other Long-Term Liabilities
Total Long-Term Liabilities
Total Liabilities
+ Total Preferred Equity
+ Minority Interest
+ Share Capital & APIC
+ Retained Earnings & Other Equity
Total Equity
Total Liabilities & Equity

37.70%

%
4.24%
2.17%
23.20%
32.33%
0.00%
33.04%
39.21%
6.18%
34.63%
67.67%
100.00%

34.24%
68.54%
12.44%
115.22%
35.70%
35.70%
150.93%
1.28%
0.00%
4.55%
-56.76%
-50.93%
100.00%

5.34%
2.27%
12.55%
21.23%
0.00%
18.80%
26.65%
7.84%
59.97%
78.77%
100.00%

2.06%
2.25%
11.88%
16.73%
0.00%
15.71%
23.95%
8.24%
67.56%
83.27%
100.00%

0.71%
5.91%
23.79%
30.78%
0.00%
25.23%
45.70%
20.47%
43.99%
69.22%
100.00%

26.64%
7.32%
24.99%
58.95%
76.40%
0.40%
76.81%
135.76%
6.70%
0.00%
22.31%
-64.77%
-35.76%
100.00%

30.91%
31.67%
30.36%
92.93%
62.50%
0.34%
62.84%
155.77%
6.07%
0.00%
22.40%
-84.24%
-55.77%
100.00%

94.03%
87.03%
132.44%
313.50%
245.41%
0.70%
246.11%
559.61%
19.68%
0.00%
90.73%
-570.02%
-459.61%
100.00%

Source: Bloomberg

The company being from a capital intensive industry, one can clearly see that a
major portion of the companys assets are in the form of fixed assets ie. Air
planes, air busses, etc.
Other current assets on the balance sheet such are cash etc are a small number
because the company doesnt need to hold liquid assets.
On the liabilities side, we can see the current liabilities shooting up to 313% of
the total assets! This had happened because Kingfisher defaulted on a lot of
payments to its suppliers, employees and others. It kept delaying salaries to its
employees, didnt pay fuel charges to HPCL and BPCL, because of which its
equity share capital ran into negative.

2. SpiceJet
Kingfisher Airlines: Ratio Analysis
1 Liquidity Ratios
a Current Ratio = Current Assets/ Current Liabilities

SpiceJet

200
9

2010

2011

2012

2013

1.07

1.03

0.4

0.3

0.5

In 2010, SpiceJet began international operations, thus leading to drop in assets. Short
term investments of SpiceJet dropped to 0 in 2011 thus lowering the assets and
amount payable increased increasing the liabilities owing to slowdown of Indian
economy. Purchase of nine more aircrafts in 2012 further increased liabilities.
b Quick Ratio = (Current Assets- Inventory)/ Current Liabilities

SpiceJet

200
9

2010

2011

2012

2013

1.05

1.01

0.34

0.26

0.43

Increasing inventories from 2009 to 2013 led to continuous decrease in quick ratios
consecutively. However, market Share of spice jet suddenly rose to 12.5 % from 10.5 % in
2013 causing a high quick ratio compared to previous years. This was made possible due to
better aircraft utilization.

2 Profitability Ratios:
a Gross Profit Ratio = (EBIT)/ Net Sales

SpiceJet

200
9

2010

2011

2012

2013

-0.23

0.02

0.03

-0.14

-0.03

In 2012, SpiceJet inducted 9 additional jets. This asset purchase activity to increase the
overall capacity and future revenues reduced the operating profits even though net sales
improved. This resulted in reduced gross profit ratios in 2012 and 2013.

b Net profit ratio = PAT/ Net Sales

SpiceJet

200
9

2010

2011

2012

2013

-0.21

0.03

0.03

-0.15

-0.03

The net profit ratio follows the same trend as mentioned above for gross profit
ratio.
c Return on Assets = NPAT/ Total Assets:
Year

200
9

2010

2011

2012

2013

SpiceJet

-0.34

0.04

0.09

-0.31

-0.06

Due to purchase of aircraft during 2012, the total assets increased. However, due to
increased expenses, the net profit declined substantially and hence we observe a zero
(negative) value of return on assets in 2012 and 2013

d Return on Equity = (NPAT Dividends) / (Paid up capital + reserves and surplus)

SpiceJet

200
9

2010

-0.77

-0.33

2011
0.31

2012
4.13

2013
0.85

SpiceJet had a high ROE in 2012, indicating higher management's effectiveness with respect
to the amount of net income returned as a percentage of shareholders equity. Spicejets Get
more when you fly campaign improved their online presence and helped drive the customers
to the Spicejet website, as evident by the high ratio of 2012.

3 Turnover Ratios
a Inventory Turnover Ratio =COGS/ Average Inventory
200
9

2010

2011

2012

2013

SpiceJet

129

146.5

157.6

150.06

143.89

High value of this ratio suggests that spicejet has shortage of inventory which can
have effect on its sales.
b Collection Period = 365/ (Net Credit Sales/ Average Debtors)
200
9

2010

2011

2012

2013

19

23

26

12

15

Kingfisher
SpiceJet

c Fixed Assets Turnover ratio = Net Sales/ Total Assets

SpiceJet

200
9

2010

2011

2012

2013

6.68

5.57

3.48

2.57

2.45

Decreasing value of this ratio for spicejet indicates dwindling sales which can be
attributed to shortage in inventory and changes in Indian Economy.
4 Leverage Ratios:
a Debt/Equity Ratio: Debt/ Equity

SpiceJet

200
9

2010

2011

2012

2013

-0.01

0.96

0.22

-6.28

-7.06

In 2012, short term borrowings of spicejet significantly increased and equity fell
considerably owing to slowdown of Indian economy and other changes in its
investments.Interest Coverage Ratio = EBIT/ Interest Expense
SpiceJet

2009

2010

2011

2012

2013

-33.01

6.35

20.65

-13.72

-1.72

Spicejet data shows increasing and then decreasing trend of profit because of
significant changes in sales, inventory, investments, liabilities and borrowings.
5 Valuation Ratios:
a Earnings per share = NPAT/ Number of Shares
SpiceJet

2009

2010

2011

2012

2013

2.54

2.5

Spicejet earned some profit in 2010 and 2011

COMMON SIZE BALANCE SHEET
In Millions of INR except Per
Share
12 Months Ending
Assets
+ Cash & Near Cash Items
+ Short-Term Investments
+ Accounts & Notes Receivable
+ Inventories
+ Other Current Assets
Total Current Assets

FY 2007
05/31/20
06

FY 2008
03/31/20
08

FY 2009
03/31/20
09

FY 2010
03/31/20
10

FY 2011
03/31/201
1

0.89%
8.52%
0.60%
0.60%
14.51%
25.12%

30.84%
26.98%
0.08%
0.57%
12.50%
70.98%

29.87%
18.10%
1.20%
1.21%
25.11%
75.48%

34.45%
12.74%
1.45%
1.13%
20.27%
70.04%

1.26%
#VALUE!
1.55%
1.83%
20.76%
25.40%

+ LT Investments & LT
Receivables
+ Net Fixed Assets
+ Gross Fixed Assets
- Accumulated Depreciation
+ Other Long-Term Assets
Total Long-Term Assets
Total Assets
Liabilities & Shareholders'
Equity
+ Accounts Payable
+ Short-Term Borrowings
+ Other Short-Term Liabilities
Total Current Liabilities
+ Long-Term Borrowings
+ Other Long-Term Liabilities
Total Long-Term Liabilities
Total Liabilities
+ Total Preferred Equity
+ Minority Interest
+ Share Capital & APIC
+ Retained Earnings & Other
Equity
Total Equity
Total Liabilities & Equity

0.00%
72.46%
73.81%
1.35%
2.43%
74.88%
100.00%

0.00%
28.87%
29.60%
0.73%
0.15%
29.02%
100.00%

0.00%
24.20%
26.05%
1.85%
0.32%
24.52%
100.00%

0.00%
29.81%
31.71%
1.91%
0.15%
29.96%
100.00%

0.00%
7.71%
10.29%
2.59%
66.89%
74.60%
100.00%

16.00%
1.09%
13.33%
30.42%
71.85%

4.51%
12.42%
36.19%
53.12%
14.94%

15.16%
3.54%
51.89%
70.59%
43.86%

71.85%
102.27%
0.00%
0.00%
51.62%

14.94%
68.06%

43.86%
114.45%

27.41%

47.09%

11.84%
0.10%
56.17%
68.11%
33.40%
0.93%
34.33%
102.45%
0.00%
0.00%
37.19%

24.22%
7.66%
36.91%
68.79%
0.00%
2.27%
2.27%
71.06%
0.00%
0.00%
93.46%

-53.89%
-2.27%
100.00%

4.53%
31.94%
100.00%

-3.03%
44.06%
158.51%

-51.39%
-14.20%
88.24%

-64.52%
28.94%
100.00%

ANALYSIS
1. The total assets of spicejet increased from 2011 to 2012 by a huge 77%. This was because of the purchase of 9 aircrafts
by the company in its existing fleet to improve its operations.
2. The airlines began international operations in 2010, as a result of which cash and near cash items reduced by 97%. This
fall was offset by increase in inventory, thus the decreasing the current assets by 67%.
COMMON SIZE INCOME STATEMENT

In Millions of INR except Per Share

12 Months Ending
Sales
+ Other Operating Income
- Operating Expenses
Operating profit (loss)
- Interest Expense
- Foreign Exchange Losses (Gains)
- Net Non-Operating Losses (Gains)
Pretax Income
- Tax Provision
Income Before XO Items
- Extraordinary Loss Net of Tax
- Minority Interests
Net profit (loss)
- Total Cash Preferred Dividends
Net Inc Avail to Common
Shareholders

FY 2009
03/31/200
9
100.0%
1.6%
124.8%
-23.2%
0.7%
1.6%
-4.8%
-20.7%
0.2%
-20.9%

-20.9%

-20.9%

FY 2010
03/31/201
0
100.0%
0.7%
98.9%
1.8%
0.3%
-0.4%
-1.2%
3.1%
0.3%
2.8%
0.0%
0.0%
2.8%
0.0%

FY 2011
03/31/201
1
100.0%
1.2%
97.7%
3.5%
0.2%
0.3%
-1.3%
4.4%
0.9%
3.5%
0.0%
0.0%
3.5%
0.0%

FY 2012
03/31/201
2
100.0%
1.2%
115.6%
-14.4%
1.1%
0.2%
-0.3%
-15.4%

2.8%

3.5%

-15.4%

-15.4%

-15.4%

FY 2013
03/31/201
3
100.0%
1.9%
105.0%
-3.1%
1.8%
-0.4%
-1.1%
-3.4%
0.0%
-3.4%
0.0%
0.0%
-3.4%
0.0%
-3.4%

0.0%
Abnormal Losses (Gains)
Tax Effect on Abnormal Items
Normalized Income

-20.9%

0.0%
0.0%
0.0%
2.8%

0.0%
0.0%
0.0%
3.5%

0.0%

-15.4%

0.0%
0.0%
0.0%
-3.4%

Analysis
1. SpiceJet considerably expanded its operations from 2012 to 2013. Addition of new aircraft and new travel destinations
increased the passenger traffic, leading to 30% rise in operating revenue.
2. Weakening rupee and rise in fuel prices drove the company into losses in 2012. It could not pass on these burdens on the
passengers due to increasing competition and pricing pressures. However, a revenue increase in 2013 reduced the net
operating losses.