Tag: Interglobe Aviation (IndiGo)

After all-time high, IndiGo shares rally towards Rs 3000-mark — should you book profits or buy?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of InterGlobe Aviation (IndiGo) touched all-time high in Tuesday’s trade after the country’s biggest airline by market share placed an order for 500 Airbus A320 family aircraft in a record deal, breaking Tata-owned Air India’s mega-470 aircraft order with Airbus and Boeing earlier this year. The scrip has risen over 2 percent intraday to cross the Rs 2,490 mark for the first time.

The stock has gained nearly 4 percent in the last five trading sessions. On a year-to-date (YTD) basis, IndiGo shares have jumped 20 percent, while it rose 58 percent in the last one year. InterGlobe Aviation is commanding a market capitalisation of Rs 94,300 crore on Tuesday.

If one were to go by fundamental analysts, the stock of IndiGo has the potential to gain up to 28 percent, while a technical analysis suggests a level of Rs 2550.

IndiGo’s consistent approach to aircraft management has given it rich dividend by continuously being able to sustain cycles in terms of lowest cost structure and cash accretion, said ICICI Securities in its research report, maintaining a ‘Buy’ call on the counter with a target price of Rs 3,000.

Morgan Stanley said that with this new Airbus order, the company’s pending aircraft orders reach around 1,000. Market share and margin have been two key drivers, both inching up in the near term. The global brokerage maintains ‘Overweight’ stance on the counter, with a target price of Rs 3126, implying a further upside of 28 percent from the current market levels.

Meanwhile, Citigroup has raised its target price on the stock to Rs 2900 from Rs 2400 earlier.

Risks, as per analysts, include managing cost and fleet expansion in the midst of global engine crisis.

Tech View

Technically, IndiGo witnessed a symmetrical triangle pattern breakout on the weekly charts at 2150 levels, which catapulted the stock towards 2400 levels. After making fresh lifetime high levels, the stock triggered a bearish harmonic alt shark pattern on the weekly charts, which is a reversal pattern in nature, said Gaurav Bissa of InCred Equities.

“The pattern suggests a fall to 2150 levels once the stock closes below 2350 levels. So far, the stock is trading above its major swing high levels, which is keeping the buying interest intact in the stock with multiyear ascending trendline resistance at 2550 levels,” Bissa.

Further, he noted that at current market prices, the risk reward is not suitable for fresh buying and existing shareholders should book partial profit on account of bearish harmonic pattern.

IndiGo’s landmark order for 500 Airbus aircraft

The low-cost carrier said it is the largest-ever single aircraft purchase by any airline with Airbus. With an order for 500 Airbus A320 Family aircraft, the airline has become the world’s biggest A320 Family customer.

However, the engine selection and the exact mix of A320 and A321 aircraft will be done in due course, the airline said in a statement.

The purchase agreement was signed on Monday (June 19) at the Paris Air Show 2023 in the presence of senior officials of both IndiGo and Airbus.

Combined with the previous order of 480 aircraft, IndiGo’s order-book now has almost a thousand aircraft, the airline added. The order will give IndiGo a further steady stream of deliveries between 2030 and 2035, the statement read.

At present, the airline operates more than 300 aircraft and the airline’s order-book now comprises a mix of A320NEO, A321NEO and A321XLR aircraft.

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Here are five reasons why Goldman Sachs upgraded India’s largest airline

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Interglobe Avi” isinid=”INE646L01027″ bseid=”539448″ nseid=”INDIGO” sector=”Transport & Logistics” exchange=”nse”]

Goldman Sachs has upgraded Interglobe Aviation, which operates IndiGo, India’s largest airline by market share, to buy due to “comfortable valuations”, among other positive metrics. The brokerage has increased its price target on the stock to Rs 2,210 from Rs 1,990, implying a potential upside of 19 percent from Monday’s closing price.

Although catalysts for the near-term are weak due to higher fuel costs, lower yields due to seasonality and an adverse foreign currency impact, Goldman Sachs believes that expectations for a weak September quarter are largely priced in.

With crude prices having witnessed their biggest quarterly drop in over two years, Goldman Sachs believes that the trend will aid the airline’s near-to-medium-term profitability.

Here are five other factors:

Sustainable Market Share Gains

IndiGo has consolidated its leadership position further during the pandemic, increasing its market share to 58.8 percent in July this year from 48 percent in February 2020. With smaller airlines like SpiceJet struggling with cost overruns and liquidity challenges, they may end up conceding market share to IndiGo or Air India, which may benefit post the Tata acquisition. Based on the challenges to smaller incumbents, Goldman Sachs expects IndiGo to be well positioned to maintain a 55-60 percent market share over the next two to three years.

Also Read: Only Air India and Go First managed to add market share in August, but marginally

Recovery In Demand

Current domestic air traffic is 5-10 percent below pre-Covid levels while international traffic is 30-35 percent lower. Goldman Sachs expects overall air passenger traffic to grow 22 percent in FY24, assuming that international travel returns to pre-covid levels and domestic traffic grows at 10 percent. IndiGo’s fleet position keeps them well positioned to cater to the growing demand. The firm expects Airbus to prioritize IndiGo’s orders as it is their largest customer with 514 planes to be delivered.

Better pricing Discipline

Airfares in India have inched up once the COVID-related price caps were lifted by the government. Prices have increased in line with crude prices, which had hit multi-year highs during Russia’s invasion of Ukraine. Goldman Sachs sees this as a departure from historical trends as prices only increased modestly earlier, even during periods of higher crude prices. It attributes this to airlines trying to recoup earlier losses. Additionally, with market share consolidating towards IndiGo, the airline will likely have further pricing power, at least in the short term. However, the firm does not see ticket prices or yields remaining at elevated levels for very long.

Also Read: Jet Airways’ return to skies delayed with plane talks in limbo

Strong Financial Performance

Goldman Sachs expects IndiGo’s revenue to nearly double from FY20 levels over the next two years and its EBITDAR to triple over the same period. Airlines include rent and restructuring costs in their EBITDA, making it EBITDAR. It expects this financial performance to be driven by improvement in traffic, international fleet expansion, better yields, and operating leverage.

Comfortable Valuations

Considering the near-term headwinds and disruptions of higher yields, an evolving competitive landscape, and higher crude prices, Goldman Sachs believes that earnings estimates for the financial year 2025 are a more realistic assumption for the stock. The firm finds valuations of 9.5 times FY25 EV/EBITDAR to be comfortable.

Pricing, fuel prices, and forex rates are the three key variables that Goldman has cited to have a material impact on IndiGo’s earnings going forward.

Shares of Interglobe Aviation are trading 2.7 percent higher at Rs 1,845.15, as of 10:10 AM.

Also Read: 100 Best Airlines 2022: Vistara is Number 20, Indigo at 45 — but who’s on top?

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IndiGo shares dip as Gangwal family sells 2.74% stake via block deal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Interglobe Avi” isinid=”INE646L01027″ bseid=”539448″ nseid=”INDIGO” sector=”Transport & Logistics” exchange=”bse”]

Shares of IndiGo’s parent company Intergloble Aviation traded red after co-promoter Rakesh Gangwal and his wife on Thursday divested a 2.74 per cent stake in the parent company InterGlobe Aviation for Rs 2,005 crore through open market transactions.

The shares of the largest Indian airline have been losing weight in anticipation of this deal for a few days. At 10:20 am, shares of Interglobe Aviation were trading at Rs 1,933, a marginal decline from the previous close on the BSE.

In February 2022, Gangwal announced his resignation from the low-cost airline’s board of directors, gradually diminishing his equity stake over the next five years.

Gangwal and his wife, Shobha, have sold a total of 1.05 crore shares, amounting to a 2.74 per cent stake in the company, as per data from NSE.

The shares were sold in the range of Rs 1,886.47 to Rs 1,901.34 apiece, valuing the transaction at Rs 2,004.77 crore.

According to shareholding pattern information available on the stock exchanges, as of the April-June quarter, Gangwal and his family held a 36.61 percent stake in IndiGo Airlines.

He and his wife both held 14.6 percent and 8.39 percent of the company respectively while Chinkerpoo Family Trust has the remaining portion.

According to Mark D Martin of Martin Consulting Rakesh Gangwal is testing the waters with the small stake sale and doesn’t feel the need to read too much between the lines.

Also read: IndiGo shares dip over 4% as Gangwal family looks to sell stake via block deal

He believes that InterGlobe needs to expand globally as they are already saturated in the domestic market. IndiGo is already quite significantly exposed to the domestic market, he told CNBC-TV18.

Meanwhile, Pieter Elbers started as IndiGo Chief Executive Officer on Tuesday, replacing Ronojoy Dutta, who decided to retire on September 30.

(With inputs from PTI)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IndiGo takes a fair share of sky from Air India and Air Asia

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Interglobe Avi” isinid=”INE646L01027″ bseid=”539448″ nseid=”INDIGO” sector=”Transport & Logistics” exchange=”nse”]

In April 2022, the month that saw domestic air traffic take off by 90.5 percent over the previous month, IndiGo managed to attract customers who left peers like Air India and Air Asia, thereby seeing a sharp increase in its market share.

As per a report by ICICI Securities, IndiGo’s growing market dominance was first visible in March 2022 when its share went up by almost 4 percentage points to 54.8 percent.

In the subsequent month, IndiGo’s market share expanded to 58.9 percent. IndiGo and Go Air were the only two to gain customers in April, while all other airlines lost market share.

Here’s a look at IndiGo’s market share gains on a month-on-month basis:

Despite IndiGo’s growing dominance, investors are not impressed. The stock closed at Rs 1,645.05, down 2.23 percent from the previous close, on BSE on Wednesday. The scrip hit a low of Rs 1,627.45 around 13:40.

The stock has been on a losing spree and has fallen consecutively for the last two days in a row, underperforming the sector by 0.62 percent.

The report showed there had been an uptick in the average daily domestic traffic, which stood at 3,75,000 for the week ended May 21, 2022, up from 3,68,000 in the previous week.

This comes as a relief as all major airlines, including IndiGo, witnessed a sequential dip in passenger load factor (PLF) in the month of April, as per the Directorate General of Civil Aviation (DGCA).

The PLF is an important metric that measures how much of an airline’s passenger carrying capacity is used. However, it should not be confused with the aeronautic load factor, as PLF only measures capacity utilisation.

Here’s a look at the passenger load factor of airlines in April 2022: 

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InterGlobe’s Rakesh Gangwal resigns from board, keeps option of returning open

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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IndiGo promoter Rakesh Gangwal resigned from the Board of Directors of InterGlobe Aviation as non-executive, non-independent director on Friday. In a letter to board members, Gangwal said he was “stepping off the board effective immediately”.

“It is my intention to gradually reduce my stake in InterGlobe over the next five-plus years,” Gangwal said. “I have been a long-term shareholder in the company for more than 15 years and it’s only natural to someday think about diversifying one’s holdings.”

He, however, has left the possibility of joining back the board open.

“I ask that no company information be shared with me that is unpublished price sensitive information (UPSI). Sometime in the future, I shall consider participating again as a board member.”

Also Read: Explained: IndiGo promoters’ dispute

On February 4, the board approved the appointment of co-founder and promoter Rahul Bhatia as the company’s managing director.

The appointment was seen by many as indicating a truce between co-founders and promoters Bhatia and Gangwal after a dispute over shareholders agreement.

Here is the text of his letter to the board:

“Dear Board Members,

February 18, 2022

I continue to be a big believer in the long-term prospects of IndiGo and more so now with the industry consolidation underway. Under this backdrop and in the long-term, Indian aviation should prosper, as in various other parts of the world.

I have been a long-term shareholder in the company for more than 15 years and it’s only natural to someday think about diversifying one’s holdings.

Accordingly, my current intention is to slowly reduce my equity stake in the company over the next five plus years. While new investors should benefit from the potential future growth in the company’s share price, a gradual reduction of my stake should also allow me to benefit from some of the upsides. Like any plan, future events may impact my current thinking.

However, I am concerned about the optics of reducing my holdings even though such transactions would only be undertaken when I do not have any unpublished price sensitive information (UPS). As you are aware, on an ongoing basis, the company provides us information and some of this is UPSI.

Being a co-founder, co-promoter and director, this issue takes on great significance.

After considerable thought, I see only one clear path to address this issue. Regrettably, and effective immediately, I am stepping off the Board.

Accordingly, I ask that no Company information be shared with me that is UPSI and, having stepped down as a director, there should be no reason to share such information. Sometime in the future, I shall consider participating again as a board member.

— Rakesh Gangwal”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IndiGo appoints Co-founder Rahul Bhatia as Managing Director

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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InterGlobe Aviation on Friday announced the appointment of its Co-founder Rahul Bhatia as the company’s Managing Director with immediate effect. The company is the parent of the country’s largest airline IndiGo.

Bhatia is the Co-founder and Promoter of InterGlobe Aviation. The board of directors, during its meeting on Friday, unanimously approved the appointment of Bhatia as the managing director with immediate effect, subject to the approval of the shareholders, according to a statement.

Bhatia said his agenda would be transformational and would focus on expanding the airline’s presence in India and in international markets and building for the long term. IndiGo Chairman Meleveetil Damodaran said the move will further strengthen the airline in the years ahead. Bhatia would oversee all aspects of the airline, and actively lead the management team, he added.

Also Read: IndiGo Q3 results: Net profit at Rs 128.4 crore, beats estimates

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Kotak Institutional Equities raises Interglobe Aviation target price; here’s why

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Interglobe Aviation has been rallying in the recent past and the stock closed 4.7 percent in the green on Monday trading at Rs 2055 a share. Indigo’s parent company has rallied 8 percent in the last month and an impressive 30 percent in the past six months. The stock is now just 10 percent away from its 52-week high of Rs 2,300.

The rally is across the aviation sector which has felt the brunt of the COVID-19 pandemic shutdowns. The domestic air traffic has picked up and is now at 76 percent of pre-COVID levels.

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The air traffic has crossed 300,000 passengers after seven months so that is the positive for the entire industry. The Tata Group is now planning a complete overhaul of Air India’s existing operating model as well. They are looking to cut costs and streamline operations and TCS will step in and manage the IT and digital operations of Air India.

Analysing Indigo

Kotak Institutional Equities has put out a note with a buy rating on Interglobe Aviation with a target price of Rs 2,600. They see the Tata’s acquisition of Air India would help accelerate the pace of international volumes for Indian carriers on the whole and also there would be an increase in pricing as the Tatas would want to earn a return on the equity investment, which will in turn means better pricing for the sector as a whole and benefit players like Interglobe.

ALSO READ: Tatas know what’s best for Air India: Martin Consulting

Meanwhile, Morgan Stanley has said that the Indian airline sector is now consolidating with two groups, IndiGo and Tata that now control 77 percent of the market share and the profitable turnaround for Air India will benefit the entire sector in terms of a better pricing environment.

It is noteworthy that higher aviation turbine fuel (ATF) prices could continue to hamper the profitability of these companies.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow