Alpha Ideas 20-20: Why Value Investor Abhinav Mansinghka Is Betting On IndiGo
Here’s why Abhinav Mansinghka chose India’s largest airline as his Alpha Idea.
A tussle between its billionaire co-founders, which played out in public last month, didn’t dissuade Abhinav Mansinghka from choosing India’s largest airline as his investment bet.
That, according to the value investor, is because of the growing passenger base of InterGlobe Aviation Ltd.—the parent of IndiGo—apart from its low fares and cost structure and expansion plans.
The number of Indians taking to the skies grew at an annualised rate of 16.3 percent in the five years through February 2018, Mansinghka said at the Alpha Ideas 20-20 conference in Mumbai. That compares with a growth rate of 5.5 percent in the previous five years, he said. “International traffic grew at an annualised rate of 8.3 percent over the past 10 years.”
IndiGo’s low-cost structure helps it to charge lower fares, leading to high passenger growth, he said. Its passenger growth, he said, outpaced the industry in the last 13 months.
The budget carrier has a fleet of 235 aircraft, which is expected to increase to 600. That, coupled with the government’s target to double the number of airports in India to 250 in the next few years, makes the company well positioned for long-term growth, Mansinghka said.
Key Risks Highlighted
- Promoter differences restrain execution ability.
- Irrational capital could delay industry consolidation.
- Position of dominance could attract regulatory intervention.
- Strategic missteps may haunt in hindsight.
- Unfortunate accidents could alter safety perception.
- Inability to react in time to a protracted demand slowdown.
- Cyclical nature of industry.
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(Abhinav Mansinghka is not a SEBI-registered investment advisors/analysts.)
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