IndiGo shares plunge 18%, its biggest fall since January 2016

Mumbai: Shares of InterGlobe Aviation Ltd on Thursday plunged nearly 18%, its steepest fall since January 2016, after the company reported a 75% drop in its March-quarter earnings.

IndiGo shares fell as much as 17.57% in intraday trade, its biggest fall since 22 January 2016 and touched a low of Rs111.30 a share—a level last seen on 18 October 2017.

At 2.09pm, the stock was trading at Rs1,201.45 on BSE, down 10.89% from its previous close. So far this year, it declined 4.5%. The scrip declined 22% since touching a record high on 20 April, wiping out over $2 billion market value.

The company reported a net profit of Rs117.64 crore during the quarter, down from Rs440 crore a year ago on costlier fuel, lower yields and a forex loss.

Revenue, however, grew 17.8% from Rs5,141.99 crore a year ago to Rs6,056.84 crore in the latest quarter. Fuel cost during the quarter rose to Rs2,338 crore from Rs1,751 crore a year ago. The company booked a forex loss of Rs 92.50 crore on account of rupee depreciation in the quarter.

The company said in a statement to the BSE that its latest numbers include certain credits received from manufacturers to offset impact of aircraft groundings and delivery delays. The company, however, didn’t reveal details on the same.

According to a person aware of the matter, IndiGo made Rs150-180 crore on the account of sale and leaseback of aircraft during the March quarter. However, Mint couldn’t independently verify this.

The airline didn’t reveal the compensation it received from Pratt & Whitney due to the grounding of some of its Airbus planes during the quarter. During January-March, IndiGo had grounded 11 Airbus A320 Neo aircraft due to engine glitches. The airline leased aircraft during the period to ramp up its capacity.

IndiGo said its finance income during the March quarter earned from fixed deposits and mutual funds stood at Rs248 crore. Had it not been for the ‘certain credits the airline received from manufacturers to offset impact of aircraft groundings and delivery delays, and its finance income, the airline would have likely reported a loss during Q4 of FY18.

“The yields have been weak as airlines have not passed on the impact of higher fuel prices. In the past too, there have been instances when airlines have passed on the impact of higher fuel prices with a lag. As such we expect yields to improve in first quarter of fiscal year 2019 in response to higher fuel prices and favourable seasonality. However fuel prices have continued to rise even in Q1FY19 giving rise to incremental pressure on margins and earnings”, said IDFC Securities in a note to its investors.

After accounting for the recent surge in fuel prices, the brokerage firm has lowered its fiscal year 2019-20 estimates earnings by 19.5%-11.1%. The firm has downgraded the stock to Neutral and cut price target by 12% to Rs1293 a share.

Of the analysts covering the stock, 16 have a “buy” rating, three have a “hold” rating, while one have a “sell” rating, shows Bloomberg data.

Indigo shares started falling after its president Aditya Ghosh resigned on 26 April.

Reports suggest that the resignation came as the company facing technical issues with its engines and recent criticism by parliamentary panel over the discourteous behaviour of its staff with customer.

Mint also reported that Ghosh was unhappy due to withdrawal from race to buy minority stake in Air India.

However, InterGlobe Aviation co-founder and director Rahul Bhatia dismissed speculation that the exit of Aditya Ghosh had anything to do with the turbulent year that IndiGo, the airline operated by the company, has experienced, including the trouble it has been having with the engines of its Airbus A320neo aircraft.

Mint reported on Wednesday that Securities Exchange Board of India is looking into a plunge in shares of the company just before it announced the resignation of its top executive Aditya Ghosh.