IndiGo soars 10% as CEO eyes 'profitability' after Rs 1,681 cr loss in Q4

Shares of InterGlobe Aviation – the parent company of IndiGo – soared 10 per cent to Rs 1,808.5 apiece on the BSE on Thursday after the company’s chief executive officer (CEO) Ronojoy Dutta said that profitability was the top-of-the-mind priority for the company.

"You almost have to hit the point - the sweet spot just right - because you can keep pushing up fares and then at a certain point demand actually falls off… So, you have a tug-of-war, but the key to profitability is to keep managing our business on the revenue side," he said.

The comments came on the back of Rs 1,681-crore loss for the January-March quarter of FY22 (Q4FY22) due to the rise in jet fuel prices and higher exchange rate.

The airline’s fuel expenses increased 68 per cent to Rs 3,220.58 crore in Q4, from Rs 1,914.45 crore in the corresponding period last year. The loss was significantly higher than the average estimate of Rs 830 crore from analysts tracked by Bloomberg.

The company had reported a small, but surprise profit of Rs 128 crore in Q3.

Moreover, the airline earned 29 per cent higher revenue of Rs 8,020.75 crore at a better yield of Rs 4.24 per kilometre, compared with Rs 3.76 a year ago.

Going forward, analysts are cautiously optimistic on the prospects of the airline as it manages demand revival amid increased competition.

Edelweiss Securities, for instance, said that Indigo is a near-term proxy play for a re-opening trade led by better yields and pent-up passenger demand. Over the long-term, addition of XLRR fleet and improved cargo business shall enhance competitiveness.

The brokerage has, however trimmed target price to Rs 2,256 on weak near-term outlook amid soaring fuel prices, but has maintained ‘buy’ rating on robust long-term outlook.

Those at Motilal Oswal Financial Services, on the other hand, said that despite the near-term challenges, IndiGo will be out of the woods stronger than before with various preemptive measures already undertaken.

“However, the resurgence of airlines (Air India, Spicejet) and upcoming Akasa along with established Jet Airways would reduce IndiGo’s market share going forward. We value the stock at 7x FY24E EV/EBITDAR to arrive at our target price of Rs 1,779. We maintain Neutral owing to the limited upside from current levels,” it added.

The shares had pared gains partially by noon and were up 5 per cent at Rs 1,725 at 11:40 AM. In comparison, the benchmark S&P BSE Sensex was down 0.54 per cent.