Shares in Kingfisher Airlines dropped more than 10% on Friday morning, a day after a report said the country's aviation regulator had concerns about safety standards.
The troubled private airline tumbled 10.76% to 18.25 rupees on opening at the Bombay Stock Exchange. It recovered slightly but was still down more than 6.0% within an hour of the opening bell.
The Times of India said on Thursday that an audit by the Directorate General of Civil Aviation (DGCA) suggested Kingfisher's licence may be under threat as its financial predicament could impinge on safety.
Kingfisher strongly denied that safety was compromised and the DGCA later said there was no threat of cancellation, although it had asked for "rectification measures".
The Bangalore-based carrier, which has seen its market share of passengers slump in recent months, is battling a cash-flow crisis it says is caused by soaring fuel costs and high local sales taxes as well as a domestic price war.
The airline shelved its low-cost Kingfisher Red service in September in favour of more lucrative full-fare routes, axed unprofitable domestic routes and has grounded 15 aircraft because it was was unable to pay maintenance fees.