Going global good for IndiGo as home turf to get crowded

Given the factors such as network expansion, capacity deployment, and a possible benefit of tax loss, analysts have raised the earnings per share (EPS) forecast for FY25 by as much as 38% (Emkay).

The stock fell by 4.7% on Thursday on the BSE. It has fallen by over 10% in the past 10 trading sessions amid weakness in the broader market and concerns over rising international crude prices which have gained nearly 14% since the last week of June.

In a post-earnings conference call, the company which operates IndiGo, India’s largest airline by market share, said that it plans to expand capacity on international routes to 30% at the end of FY24 from 23% at present.

The airline served 26 international destinations and 37 additional destinations through strategic partnerships at the end of the June quarter. Its market share on international routes improved to around 15-16% from 12.8% before the Covid-19 pandemic.

ET Bureau

The airline plans to add six more international destinations in the current year. In the coming quarters, domestic competition is likely to intensify from SpiceJet (fund infusion), Jet Airways (revival), Akasa Air and Air India, which are either adding capacity aggressively or starting operations anew. This, and given the present dominating market share means there may not be enough room for further expansion in the domestic market. Hence, the sustained focus on international routes is advantageous. The re-opening of the Chinese economy may also add to the demand in the international market.

On the balance sheet front, analysts expect the company to report positive reserves and surplus by FY25 backed by improving profitability. This would make the balance sheet stronger. Due to the asset-light nature of its fleet – it owns 14 of the total of 316 aircraft – analysts believe that the airline will aggressively add capacity in the coming quarters.In the June quarter, IndiGo recorded its highest-ever net profit of ₹3,090 crore compared with a net loss of ₹1,064 crore a year ago. Revenue rose by 29.8% to ₹16,683.1 crore.

Considering the FY25 estimates, the airline’s enterprise value (EV) is 7.6 times the operating profit (Ebitda) compared with the two-year average valuation of 10.