IndiGo’s stock fell over 13% in early trading on October 28, 2024, opening at ₹4,108.80 before plunging to ₹3,778.50. This dramatic drop follows a disappointing earnings report, with a net loss of ₹986.7 crore for Q2FY25.
The company attributed the loss primarily to increased fuel costs and a record number of aircraft groundings, which weighed heavily on its bottom line.
Q2FY25 Key Financial Highlights
Financial Metrics Overview
| Metric | Q2FY24 | Q2FY25 | % Change |
|---|---|---|---|
| Net Profit/Loss | ₹188.9 Cr | -₹986.7 Cr | -621.91% |
| EBITDAR (Operating Profit) | ₹2,446.5 Cr | ₹2,434 Cr | -0.51% |
| Share Price (Opening Q2FY25) | ₹4,364.65 | ₹3,778.50 | -13.43% |
Why IndiGo’s Earnings Disappointed Investors
Several factors contributed to the weak Q2 performance:
- Increased Fuel Costs: Higher fuel prices substantially raised operating expenses, impacting IndiGo’s profitability.
- Grounding of Aircraft: IndiGo faced an unusually high number of aircraft groundings in Q2FY25, limiting operational capacity.
- Market Overvaluation: High valuation compared to global peers and increasing competition from other airlines contributed to the negative investor sentiment.
Brokerage Downgrades and Future Outlook
Following the disappointing Q2 report, brokerage firm Nuvama Wealth Management downgraded IndiGo’s stock to a ‘hold’ rating, lowering FY25E and FY26E EBITDAR estimates by 14% and 7%, respectively.
Nuvama cited concerns over the company’s valuation premium compared to global competitors, slowing domestic demand, and ongoing promoter selling as reasons for the downgrade. The revised target price now stands at ₹4,415.
Brokerage Recommendations:
| Brokerage Firm | Previous Rating | Current Rating | Target Price (₹) |
|---|---|---|---|
| Nuvama Wealth Management | Buy | Hold | 4,415 |
What’s Next for IndiGo?
While the Q2 results were challenging, some factors provide a glimmer of hope. The reduction in groundings is expected to improve operational efficiency in the coming quarters.
Additionally, IndiGo’s strategy to transition from a Low-Cost Carrier (LCC) to a hybrid model may open new revenue streams. However, investors should stay cautious as domestic demand dynamics and capacity expansion may affect revenue growth.
Investment Consideration
IndiGo’s recent performance highlights the volatility in the aviation sector, and investors may consider a balanced approach given its valuation and market competition.
Disclaimer
This article provides information for educational purposes and does not constitute financial advice. Please consult a financial expert before making investment decisions.
