Jet Airways (India) Ltd. stares at the suspension of its stock from trading as the carrier is in breach of regulatory norms by delaying earnings and not appointing key committees on its board.
The company is not in a position to consider the audited financial results for the year ended March, the National Stock Exchange said in a notification. Considering that and observations made by auditor that there's no one to approve the earnings, there are concerns about the continuity of flow of information that is vital to price discovery, the NSE said, adding that the scrip may not reflect the actual status of the carrier.
The exchange has decided to move the stock from rolling to trade-to-trade segment from June 28. That means buyers of Jet Airways stock will have to compulsorily take delivery and can't square off positions during intra-day trading. Also, derivatives traders will have to settle positions by the end of month since new contracts won't be allowed after that.
Shares of the carrier tumbled 20 percent on Thursday as investors moved to square off their long positions. Jet Airways, with a debt of Rs 10,000 crore, has lost nearly 90 percent of its value since January last year as it struggled to repay lenders. The airline didn't have enough cash to pay aircraft lessors and employees and lenders, forcing it halt operations. A revival looks difficult as banks have so far failed to find an investor or buyer.
The company hasn't considered and approved the audited financial results for 2018-19, saying lenders have initiated a bidding process to change the management. It also cited resignations by key board and managerial personnel and other employees for not approving the earnings. Its chief executive officer, chief financial officer and company secretary resigned in May.
What Norms Require
The NSE has grounds to suspend the trading as the airline has violated the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The exchange can penalise the company with a fine ranging from Rs 1,000 to Rs 5,000 a day.
Currently, the airline is in breach of regulatory norms for its:
- Failure to appoint a woman director on the board.
- Non-compliance with the constitution of the audit committee.
- Non-compliance with the constitution of the Nomination and Renumeration Committee.
- Non-submission of the financial results.
A company is required to publish its annual results within 60 days of the close of year, according to listing and disclosure requirements. For Jet Airways, that deadline was May 30. The quarterly earnings should be disclosed within 45 days of the close of the quarter. The airline missed that too.
For the quarter ending June, the airline will have to announce earnings by Aug. 15.
If a company fails to meet the requirement for two straight quarters—for Jet Airways by Aug. 15—the stock exchange will move it to the non-compliant Z category with trade-to-trade status after giving a seven-day notice.
Before suspending the stock, exchange will have to give a 21-day notice to the company to pay the fine and comply with the norms. If it fails, the exchange will suspend trading and freeze shares of promoter group.
After 15 days of suspension, the exchange will open a limited window for trade-to-trade settlement on the first day of the week for the next six months.
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