Jefferies and Nomura have retained their ‘Buy' ratings on InterGlobe Aviation, the operator of IndiGo, despite near-term pressure on profitability from elevated fuel costs and uncertainty over proposed airfare regulations. Jefferies has a target price of Rs 5,840, while Nomura has set a target of Rs 6,000.
Jefferies said the ongoing conflict in West Asia continues to keep fuel costs elevated, delaying the airline's earnings recovery. While disciplined capacity deployment and higher fares are helping protect profitability, fare increases are also weighing on passenger growth.
Nomura, meanwhile, is watching the government's proposed airfare rules, which are expected to be notified within two weeks. The brokerage said visibility on the new framework remains limited, but expects it to focus more on fare transparency and disclosures around ancillary charges than on direct government intervention in pricing.
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Jefferies Sees IndiGo Earnings Recovery Delayed By High Fuel Costs
Jefferies retained its Buy rating on IndiGo with a target price of Rs 5,840, while cautioning that elevated fuel prices amid the West Asia conflict continue to weigh on near-term profitability.
The brokerage said the airline is using disciplined capacity deployment and higher fares to protect its margins. However, fare hikes are helping offset cost pressures at the expense of passenger growth, highlighting the trade-off between protecting yields and sustaining traffic.
Industry-wide efforts to control costs are helping airlines manage inflationary pressures, but a sustained earnings recovery will depend on geopolitical tensions easing and fuel costs declining.
Jefferies remains positive on IndiGo's long-term growth prospects, with fleet additions expected to support expansion despite ongoing aircraft grounding issues.
Winter Schedule, Fleet Additions Key To IndiGo Growth
Jefferies expects the winter schedule to support capacity expansion and stronger available seat kilometre (ASK) growth in the second half of FY27.
Fleet additions remain an important driver of IndiGo's growth, although ongoing aircraft grounding issues continue to pose operational challenges. The brokerage also noted that potential changes to airfare regulations could provide greater pricing flexibility.
However, the timing and strength of the airline's earnings recovery remain linked to the trajectory of fuel costs and the broader geopolitical environment.
Nomura Watches Government's New Airfare Rules
Nomura maintained its Buy rating on IndiGo with a target price of Rs 6,000, as the government prepares to notify new airfare rules within two weeks.
The brokerage said visibility on the proposed regulations remains low. Its base case, however, is that the framework will bring greater oversight and transparency to airfares rather than introduce direct government intervention in pricing.
Nomura expects the changes to focus on stronger disclosures related to ticket fares and ancillary components. The eventual framework could influence how airlines communicate pricing to passengers, although its precise implications for IndiGo remain unclear.
Elevated Oil Prices Keep Airline Profitability Under Pressure
Oil prices remain a key variable for IndiGo's earnings outlook as geopolitical tensions continue to threaten supply.
Brent crude fell below $109 per barrel on Monday but retained most of the previous week's gains amid escalating hostilities in the Middle East and Eastern Europe.
Clashes involving Saudi Arabia and Iran-backed Houthi rebels continued, while the Houthis targeted Yanbu, a key Saudi oil export hub. Three tankers were also damaged in the Strait of Hormuz over the weekend, as Iran's Islamic Revolutionary Guard Corps navy maintained that the waterway remained closed and vessels could pass only with its authorisation.
In Europe, Ukrainian attacks sparked fires at an oil export terminal and a storage depot in St Petersburg, as Kyiv launched more than 1,000 drones at Russia in one of the war's largest aerial assaults.
Meanwhile, US President Donald Trump said he had reached a diesel export agreement with Russia and postponed additional sanctions to avoid jeopardising peace negotiations with Ukraine.
For IndiGo, sustained fuel-cost pressure could continue to delay the earnings recovery, even as fare increases and capacity discipline help cushion the impact.
That said, both Jefferies and Nomura remain positive on the airline, but the near-term outlook hinges on fuel prices, geopolitical developments and the final shape of the government's airfare rules.
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