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IndiGo Airlines’ June quarter revenue was up 26 per cent y-o-y while profit grew 37 per cent to ₹811 crore, the highest so far. The good show in the seasonally strong quarter was thanks to passenger traffic (25 per cent) growing faster than capacity (19 per cent), higher average passenger fares (up 2 per cent), and costs kept under check. Yet, the stock slipped last week. A few factors seem to be causing concern.
One, the continuing engine troubles in the A320 neo aircraft that has contributed to moderation of expected capacity growth to 20 per cent annually from 25 per cent earlier. Two, the company’s planned shift from aircraft sale-and-leaseback model to a mix of sale-and-leaseback and purchase could lower profits and increase capex. Oil on the rise again in recent days also seems to have soured sentiment. Besides, the 50 per cent plus rally in the stock since February has made it pricey; trailing 12-month price-to-earnings is 28 times versus the average of 19 times in the past.
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