Business News

IndiGo Emerges as India’s First Airline to Surpass Rs 1 Lakh Crore Market Cap, Stock Rises 4%

The Entrepreneur Bytes Team June 29, 2023 56

IndiGo, the renowned Indian airline, has achieved a significant milestone by becoming the country’s first airline with a market capitalization (m-cap) exceeding Rs 1 lakh crore. The parent company, InterGlobe Aviation Ltd, recorded a turnover of Rs 9.20 crore on the Bombay Stock Exchange (BSE), resulting in a market cap of Rs 1,01,007.56 crore. The company’s stock climbed 3.55% during the trading session, closing at Rs 2,619.85 compared to its previous close of Rs 2,529.95. So far in 2023, the stock has surged by over 28%. The recent rise in share price followed Go First, owned by Wadia Group, filing for insolvency.

IndiGo made headlines earlier this month with its remarkable order of 500 Airbus Neo family aircraft, set to be delivered between 2030 and 2035. This monumental $50 billion deal stands as the largest-ever single aircraft purchase by any airline in aviation history.

UBS, a foreign brokerage firm, has revised its target price for IndiGo to Rs 3,300 from the previous target of Rs 2,690. UBS believes that IndiGo is well-prepared to handle any economic downturn and can manage fluctuations in crude oil prices and the US dollar without significant cash burn. The brokerage firm attributes the improved outlook to strong underlying demand driving passenger load factors (PLF), higher yields, the suspension of Go First’s operations, and lower fuel costs due to declining crude prices.

UBS predicts an earnings per share (EPS) of Rs 82 for the June quarter of FY24, representing a 37% increase over IndiGo’s record-high annual EPS in FY18. The firm estimates a 6% sequential growth in yields for the quarter, along with a quarter-on-quarter (QoQ) growth of 7% in available seat kilometers (ASK) or an 18% year-on-year (YoY) growth. With a passenger load factor (PLF) projected at 89%, IndiGo anticipates a 13% QoQ (32% YoY) increase in revenue passenger kilometers (RPK).

UBS emphasizes that there is ample room for international travel growth, which is expected to be a significant driver of IndiGo’s future expansion. The brokerage firm highlights that international yields remain comparable to domestic yields but benefit from a better cost structure due to lower fuel taxes and improved efficiency for longer flights. UBS has moderated its yield estimate from Rs 5.13 in FY23 to Rs 4.65 for FY25, forecasting ASK growth of 18% in FY24 and 15% in FY25.

Furthermore, UBS points out that Tata’s acquisition of Air India has consolidated the Indian aviation sector, resulting in a near duopoly. This development is expected to have positive implications for pricing in the industry.

In the broader market, Indian equity benchmarks surged to new record closing highs. The BSE Sensex index gained 499 points or 0.79%, settling at 63,915, while the NSE Nifty index rose by 155 points or 0.82% to reach 18,972.

Sources By Agencies