InterGlobe Aviation's third quarter performance was a tale of two halves, a steady operating show weighed down by heavy one-off costs, leading to a sharp year-on-year decline in reported profitability. While exceptional costs and forex losses dragged reported profits sharply lower, analysts highlighted the airline's resilient core business, strong market position and relatively attractive valuations. However, a slower growth outlook, rising cost pressures and regulatory uncertainties kept some brokerages cautious on near-term visibility.
On a consolidated basis, IndiGo's revenue rose 6% year-on-year to Rs 23,472 crore compared with Rs 22,111 crore a year ago, marking the slowest Q3 revenue growth since fiscal 2021. Despite the moderation, revenues came in ahead of Street estimates, helping the airline deliver an overall operational beat.
Adjusted for forex losses, Ebitdar declined 5.5% year-on-year to ₹6,990 crore, while the Ebitdar margin eased marginally to 29.8% from 30%. Ebitda increased 3.6% to Rs 5,367 crore, though margins compressed to 22.9% from 23.4%, reflecting pressure on yields and costs. Passenger yields slipped 1.8% year-on-year to Rs 5.33 per passenger-kilometre, underscoring a softer pricing environment.
Reported net profit fell sharply by 78% year-on-year to Rs 550 crore, primarily due to significant exceptional charges and forex losses. The quarter was impacted by one-offs totalling Rs 1,547 crore, including Rs 969 crore related to the implementation of the new labour code and Rs 577 crore arising from flight disruptions. Excluding these one-offs and forex impact, IndiGo's profit after tax would have stood at a robust Rs 3,130 crore, highlighting the resilience of its core business.
Fleet strength continued to expand, with the total aircraft count rising by 23 sequentially to 440. However, free cash position declined 4% quarter-on-quarter to Rs 36,945 crore, the steepest drop in the last 18 quarters, reflecting higher cash outflows during the period.
Outlook Flags Slower Growth, Higher Costs
Management guided for capacity growth of around 10% year-on-year in the fourth quarter, a notable moderation compared with earlier expectations. Unit revenues are expected to decline by early- to mid-single digits, while unit costs are projected to rise by mid-single digits in financial year 2026 compared with fiscal 2025.
The guidance implies Q4 revenue growth of just 4.5%–6.7%, potentially the slowest Q4 growth since fiscal 2021. Cost pressures, particularly ex-fuel, could intensify, while a high base effect suggests Q4 profits may be significantly lower on a year-on-year basis. Management also refrained from commenting on whether new pilot duty time limitation norms could slow growth in the near term, and warned that one-off costs from flight cancellations may persist in Q4.
What Brokerages Say
Morgan Stanley maintained an Overweight rating on IndiGo and raised its target price to Rs 6,498 from Rs 6,359, noting that Q3 profit before tax was 18% ahead of estimates despite multiple headwinds. While acknowledging the cut in Q4 capacity guidance and higher CASK outlook, Morgan Stanley said the valuation remains attractive at fiscal 2027 EV/Ebitda of 8.5x, below the 10-year median of 9x, especially given the airline's stronger competitive position.
Citi reiterated its Buy rating but trimmed the target price to Rs 5,700 from Rs 5,800. The brokerage described Q3 as a strong performance amid unpredictable disruptions, adding that operations have largely normalised. Citi, however, cut yield estimates and factored in higher costs going ahead.
Investec struck a more cautious note, maintaining a Sell rating with a target price of Rs 4,050. It flagged weak Q3 optics and deteriorating visibility, pointing to the cut in Q4 capacity growth guidance from mid-to-high teens to around 10% year-on-year. Investec also highlighted rising regulatory risks from strict implementation of flight duty time limitation norms and intensifying cost pressures, leading it to slash FY26 EPS estimates by 35%.
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