IndiGo Shares Fall 4% as Net Loss Widens to Rs 32 bn - Views on News from Equitymaster

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  • Jul 28, 2021 - IndiGo Shares Fall 4% as Net Loss Widens to Rs 32 bn

IndiGo Shares Fall 4% as Net Loss Widens to Rs 32 bn

Jul 28, 2021

Troubles keep mounting for India's largest airline IndiGo, as the company's net loss widened due to disruptions caused by Covid on the airline industry.

InterGlobe Aviation on Tuesday reported a net loss of Rs 31.7 bn for the quarter ended June 2021. This compared to a net loss of Rs 28.4 bn reported in the June quarter a year ago.

Bottomline came worse than estimates. The street was expecting IndiGo to report a net loss of Rs 23 bn.

Spike in topline

The company's revenue from operations surged 292% year on year YoY to Rs 30.1 bn for the quarter under review.

Revenues jumped largely because IndiGo operated for more operational days during the quarter as against the year-ago period that was hit by national lockdown.

But even an almost three-times jump in revenues could not help IndiGo's net profit. This was because the company reported a 59% jump in total expenses.

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IndiGo's operations in the quarter were affected by the second wave as demand plummeted due to lockdowns and fear of transmission.

On top of that was the surge in global crude oil prices. Oil prices weighed on the company's margins as fuel cost jumped 854% YoY to Rs 12.2 bn in the quarter.

The airline reported an operating loss of Rs 14.2 bn.

Here's a table comparing IndiGo's results on key parameters.

Financial Snapshot

(Rs m) Jun-21 Jun-20
Revenue from operations 30,069 7,667
Other Income 1,633 3,771
Fuel cost 12,159 1,275
Other costs 51,285 38,589
Total cost 63,444 39,864
Profit after tax -31,742 -28,443
Data Source: Press Release

Severe impact on balance sheet but company optimistic

The impact of the ongoing limitation on operations were felt in the balance sheet with free cash declining 25% YoY.

Total debt soared as much as 35%.

IndiGo saw a more than four-fold jump in average seat kilometers in the quarter. However, its revenue per average seat kilometer fell 35% YoY reflecting lower ticket prices and demand.

IndiGo's fleet rose to 277 aircraft at the end of the June quarter from 274 a year-ago but declined on a sequential basis.

Commenting on the performance, Ronojoy Dutta, CEO at IndiGo said he was deeply disappointed with the results.

  • The number of passengers traveling declined sharply in May and June. But with the second Covid wave receding, we are seeing a measured recovery in bookings for July and August.

He also said the carrier remains "firmly optimistic" about its future and hopes to reach 100% of domestic pre-Covid capacity by the year-end.

As of June 2021, IndiGo had a total cash balance of Rs 170.7 bn comprising Rs 56.2 bn of free cash and Rs 114.5 bn of restricted cash.

It also has a potential QIP of Rs 30 bn lined up.

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Affected by rising ATF prices

Rising aviation turbine fuel (ATF) prices have been a concern for the recovering Indian airlines sector.

Oil marketing companies (OMCs) have hiked ATF prices by about 6% over the past month and by more than 60% in the past year as global crude oil prices firmed up on improved demand.

Even as passenger demand continues to improve, rising ATF prices could adversely impact the performance results of airlines.

In its report, rating agency ICRA said that rising ATF prices remain a near-term challenge for airlines.

Here's an excerpt from the report.

  • While until February, ATF prices were lower on a YoY basis, in March, April, May and June, prices were higher by 3.0%, 59.8%, 103.4% and 86.3%, respectively, on a YoY basis.

    In July, the prices have been higher by 59.7% YoY, attributed to the low base of July 2020 when prices declined by 31.1%.

IndiGo's management is expecting the fuel cost to fall further with the addition of fuel efficient NEO aircraft. NEO aircraft share increased to 59% in June 2021 from 56% in March 2021 and 43.5% in March 2020 in its total fleet.

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How the stock markets reacted to IndiGo's earnings

InterGlobe Aviation share price fell over 4.5% to Rs 1,627 after the company reported higher-than-expected loss in the first quarter.

It opened the day at Rs 1,670, down 2%.

IndiGo shares have a 52-week high quote of Rs 1,860 touched earlier this month on 15 July.

Despite all the challenges, shares of IndiGo have remained resilient even as company's losses pile up and net-worth erodes.

Over the past one year, shares of the company have gained 89%, outperforming the benchmark BSE Sensex.

At the current price of Rs 1,674 the company commands a marketcap of Rs 644.5 bn.

About InterGlobe Aviation (IndiGo)

InterGlobe Aviation is the operating company for IndiGo, India's largest passenger airline in terms of domestic market share.

The airline operates on an LCC business model, offering no-frills air-commute to passengers in the domestic as well as international sectors.

At present, the company commands nearly 55% of the domestic market in terms of passengers carried.

It commenced operations from August 2006 with a single aircraft.

Promoted by Mr Rahul Bhatia and Mr Rakesh Gangwal, the company was originally incorporated in January 2004 as a private limited company and converted into a public limited company in June 2006 as InterGlobe Aviation.

Subsequently, IndiGo proceeded with its IPO in 2016, wherein its shares were listed on the BSE and the NSE.

IndiGo is the flagship company of InterGlobe Group, which has diverse business interests across the aviation, hospitality, real estate, travel commerce, airline management, pilot training, aircraft maintenance and IT/BPO spaces.

To know more, check out the Interglobe Aviation (Indigo) company fact sheet and quarterly results on our website.

You can also compare IndiGo with its peers.

IndiGo vs SpiceJet

Indigo vs Jet Airways

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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