Interglobe Aviation: India has the largest population in the world and 5th place in the world economy. India will soon reach the third-largest economy. With the rise in population, the travel and tourism is also seeing a boom. Air travel, which was considered to be a luxury a few years back, has now changed is course and is accessible to the mass. The Indian aviation industry has grown by 14.5% on YOY  to reach 184 million passengers annually in FY24.

The aviation industry includes airlines, airports, aircraft manufacturers, air traffic control, and support services. This industry contributed $3.5 trillion (4%) to the global GDP. India will be the third-largest aviation market in the world. With this background, let us take a look at Interglobe Aviation Limited known as Indigo, the largest airlines in India and look at their future plans.

Company Overview Of Interglobe Aviation

Interglobe Aviation(IndiGo): Established in 2006 and founders are Rahul Bhatia, Rakesh Gangwal. It is one of the largest aviation sectors in India with a 60.6% market share.  The company provides low-cost airline services which doesn’t mean low-quality services to passengers. The vision is to make Interglobe Aviation the top Global aviation player in the world. It will turn India into a global aviation hub.

In FY19, IndiGo was the first airline to operate 1,500 daily flights and had a fleet of 250 aircraft. Now it has reached 367 aircraft. It was the first Indian airline to carry more than 100 million passengers in FY23. The company has a network presence in domestic stations, metropolitan cities and international destinations. company has reported 32,407 employees in FY23.

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Products (Aircraft) of Interglobe Aviation

IndiGo has Operated a fleet of 367 aircraft including 31 owned/finance leases, 323 operating leases and 13 damp leases in FY24.

  1. A320 neo: 192 aircraft with 180 to 186 seats of passengers.
  2. A320 ceo: 31 aircraft with 180 seats of passengers.
  3. A321 neo: 94 aircraft with 222 to 232 seats of passengers.
  4. ATR: 45 aircraft with 39 seats of passengers.
  5. A321 freighter: 3 aircraft with 27 tonnes of carriage
  6. B777-300ER: 2 aircraft of Damp lease with 400 seats of passengers.

Operations of Interglobe Aviation

IndiGo has been currently operating a fleet of 367 aircraft and 2000+ daily flights to 30+ international destinations with 500 million+ happy passengers worldwide. The company provides airline services to both domestic and international destinations.

In Domestic has 88 destinations with over 400 routes.  The company adds an extra 10 destinations in FY23. In International networks has 100 direct international routes to 33 destinations from 18 Indian cities. They add an extra 7 international destinations across Asia and Africa with an increasing 25% in direct routes. In FY24, the company made a massive growth of 45% in number of passengers flown with a codeshare partnership.

Indigo has flown over 1800+ flights on a daily basis to connect 500 cities around the domestic and internationally in FY23. It was the 7th largest departure daily. The company has operating of 104 destinations in FY23. They add more destinations such as 5 domestic destinations and 2 international destinations such as Ras Al Khaimah, Itanagar, Mopa-Goa, Nashik and Dharamshala.

Cost Of Interglobe Aviation

When it comes to cost parts of the business it was very cruel to operate the business to achieve the goals. Suppose a company has to make the optimum utilization of resources to reduce the cost. IndiGo is famous for its low-cost airline services compared to other companies.

IndiGo has made a total expense increase of 12.5%  from 5,61,858 million in FY23 to 6,31,819 million in FY24. The company CASK has reduced by 9.3% from 4.83 rupees to 4.38 rupees compared to the FY24 but CASK excludes fuel & forex has increased by 4.3% compared to FY24.

On the other side, fuel cost was reduced from 2.07 rupees in FY23 to 1.72 rupees in FY24 although the increasing number of aircraft and more destinations route. The company has achieved the company goal of low-cost airline services to create maximum shareholder value.

Financials Of Interglobe Aviation

In this section, we can learn the financial metrics of Indigo before, after and at the time of COVID-19.

Before COVID-19 pandemic

In FY20, IndiGo revenue has increased YOY with a CAGR of 20.76% over the last 5 years. Before the covid revenue was 28496 Cr. in FY19. It has increased by 23.79% compared to the previous year. IndiGo has increased revenue from 28,496 Cr. in FY19 to 35756 Cr. in FY20.

The net profit of the company has increased by 35.15% in FY18. At this point company was making good revenue and net profit also. In FY19 net profit of the company decreased massively from 2,242.37 Cr. in FY18 to 156.14 Cr. in FY19 by 93.04% because overall expenses increased by 25.3% in FY20 such as aircraft fuel expenses increased by 4.3%, employee costs increased by 46.7%, and aircraft ownership expenses by 41.5% compared to FY19.

On COVID-19 pandemic

At the time of COVID-19, the company revenue dropped by 59.06% in FY21 because of the travel restrictions, lockdown and fear of the spreading of COVID-19 led to drastic changes in passenger numbers. The net loss has massively increased from -248.16 in FY20 to -5829.79 in FY21 because the revenue has dropped and expenses of rental & maintenance of aircraft, foreign exchange, depreciation & amortization, employee costs and finance costs increased. 

In FY22, the revenue increased by 77.12% compared to FY21 but the net loss increased from -5829.79 to -6171.03 Cr. The reason is expenses increased YOY It makes a net profit turned into red. In COVID-19, the company has transported medical equipment resources across India at its own cost.

After COVID-19 pandemic

IndiGo started to recover after the Covid. It has doubled its revenue in FY23 Compared to the previous year and most importantly net loss has recovered hugely from 6171.03 Cr. in FY22 to 316.72 Cr. in FY23 because of the company managed by the expenses in the form of salary cut by the firm range of 5 to 25% expect the low pay grade employee, implemented leave without pay in May, June and July. The company holds the discretionary expenses and capital expenditure projects. This will help to recover net loss and increase revenue.

Present Situation

In FY24 IndiGo reported a revenue of 712,312 million increase of 27.5% compared to FY23 they made a profit of around 82,000 million against a net loss of 3167.2 million in FY23. After the last 5 years, the company had a profit in all the quarters in FY24  although the last 6 consecutive quarters the earning profits. In FY24  the company has made an EBITDAR of 175.4 billion compared to an EBITDAR of 73.1 billion in FY23.

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Financial Metrics of Interglobe Aviation

The key financial metrics of IndiGo are given below.

ParticularsAmountParticularsAmount
CMP₹4,364.70Market Cap (Cr.)₹165,941
EPS (TTM)₹211.60Stock P/E (TTM)20.32
ROE (%)422.76%ROCE (%)19.53%
Promoter Holding (%)57.29%FII Holding (%)23.66%
Debt to Equity26.54Current Ratio2.06
Operating Profit Margin17.73%Net Profit Margin11.86%

Why are Promoters selling?

IndiGo promoter Rahul Bhatia’s Family has sold a stake of 2% which is almost 77 lacks shares at Rs. 4,362 per share recently. The amount of the deal price is Rs. 3,367 crores. It will have a lock-in period of 365 days. The amount will be used in the hospitality business and especially to increase its presence in Europe. After the IPO, it was the first time the promoters of Rahul Bhatia’s family sold their stake.

Future Plans of Interglobe Aviation

  • Interglobe Aviation has signed an order for the largest-ever purchase of bulk aircraft by any airline with Airbus. 
  • IndiGo has decided for the future and ordered a  500 A320 neo family aircraft with a deal price of $55 billion. This aircraft delivery will be the financial year  2030 to 2035.
  • In FY24 Interglobe Aviation added 65 aircraft including 12 damp leases aircraft and in the March quarter added 9 aircraft to the fleet of company.
  • Interglobe Aviation is planning to double its capacity in FY25 compared to the previous year FY24.
  • IndiGo has an ambition of around 10 to 12% capacity to the same quarter of last year. It will be 3 to 5% of YOY.
  • The company order book will be 1000 aircraft to be delivered up to 2035.
  • Interglobe Aviation has a goal to double the size of the company by 2030 and expand domestic routes and international routes.
  • For the international network, they signed a codeshare agreement with British Airways and a partnership with Malaysian Airlines and Qantas will 7 new connections to Australia and Singapore.
  • The company planning to expand the A321 XLR aircraft by 2025 for international routes worldwide.
  • IndiGo announced the order of 30 firm Airbus A350-900 aircraft and also planning to buy another option of 70 more aircraft for future international routes.

Conclusion

We are at the end of the conclusion that Interglobe Aviation had gone ty some remarkable milestones of achieving a net loss turned into a net profit of 82 billion in FY24. The company is controlled by reducing expenses and the main focus is to be cost optimization to create maximum shareholder value. Now IndiGo has carried more than 100 million passengers in a year.

Interglobe Aviation has strong fundamentals to achieve sustainable growth in YOY. The company focuses on achieving a capacity of 3 to 5% of YOY and double capacity in FY25 compared to FY24. The company has future goals of double the size in FY30 by improving the destination routes. For this purpose company is planning to purchase 500 aircraft. It will help to boost the company although it will remain one of the largest aviation companies in India.

Written by Nikhil Naik

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