IndiGo hit by massive losses and downgraded targets – will India’s top airline soar again?

InterGlobe Aviation, parent of Indigo airline has been downgraded by top broker firm Motilal Oswal by 6 per cent. target price of stock which was earmarked for Rs 4,366 has been pulled down to Rs 4,130.

report reflects on company’s financial strain due to increased operational costs, seasonal downturns, and grounded aircraft issues which have resulted in a Q2 net loss of Rs 990 crore – this has surpassed initial estimate of Rs 680 crore.

report attributes to IndiGo’s financial challenges which have cropped up because of fuel prices and engine issues related to Pratt & Whitney engines, which left over 60 aircraft grounded.

Furr, JP Morgan too has adjusted its outlook on InterGlobe Aviation by reducing its target to Rs 4,800 from previous Rs 4,950. firm has maintained an overweight rating of stock. company’s loss of Rs 990 crore was tably larger than JP Morgan estimate of Rs 220 crore loss. discrepancy was attributed to unexpectedly high operational costs.

airline, however, expects to reactivate around 20 grounded planes in FY26 and reduce number to 40. However, disruptions in operations have severely impacted airline’s capacity and profits.

In its Q2FY25 result, IndiGo reported a 26 per cent year-on-year decline in EBIDTA reaching Rs 1,620 crore. airline has however achieved an increase in revenue passenger kilometres (RPK) to Rs 3,160 crore and a passenger load factor of 82.7 percent, but operational costs have outpaced revenue growth.

airline’s yield per kilometre has grown slightly to Rs 4.55 but high fuel expenses and costs associated with aircraft on ground increased losses.

IndiGo however reported a substantial rise in demand ahead of festive season in October 2024 which may contribute to its Q3 results. company’s manment remains optimistic, reaffirming its long-term goal of doubling international capacity by FY25. airline is set to increase its capacity share in international market to 30 per cent by fiscal end supported by addition of two international routes in Q2 and three more planned by year-end.

company’s ancillary revenues, generated from cargo and freighter business are performing well to offer a buffer against high costs impacting core passenger business. Despite inherent challenges, Motilal Oswal has made a forecast of FY26 revenues of Rs 82,140 crore with an EBITDA of Rs 17,090 crore.

However, Kotak maintains a ‘buy’ rating on InterGlobe Aviation stocks but has cut target price from Rs 5,700 to Rs 5,400, and finally to Rs 5,200. While long-term growth outlook remains intact, report advises caution and maintaining a ‘neutral’ rating for stock.

While IndiGo grapples with its inherent operational challenges, market is likely to watch its ability to man costs and expand international routes to sustain profits. InterGlobe Aviation stock remained volatile on Tuesday hitting a low of Rs 3,980 and n making a recovery to around Rs 4,017 by 12:30 pm.