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    InterGlobe Aviation Limited

    INDIGOGood
    Services·24 Jan 2025
    Management Summary

    IndiGo delivered an exceptional Q3 FY25 driven by festive season demand surge, with record passengers and 17.4% profit margin ex-forex. The headline profit was impacted by INR 14 billion unrealized forex loss from 2% rupee depreciation on ~$8 billion net dollar exposure. Management guided Q4 capacity growth at ~20% YoY (due to low base) and early single-digit PRASK moderation YoY. IndiGoStretch business class launched on Delhi-Mumbai and Delhi-Bangalore with positive initial reception.

    Highlights

    8

    • Total income of INR 230 billion (+15% YoY) against capacity growth of 12%; net profit of INR 24.5 billion (11% margin) including INR 14 billion forex MTM loss

    • Excluding forex, profit after tax was INR 38.5 billion (17.4% margin), up 26% YoY from INR 30.5 billion

    • Record 31 million passengers served in the quarter (+13% YoY); highest ever in IndiGo's history

    • Load factors above 90% for most of November and December; touched 10 million monthly passengers in November

    • EBITDAR of INR 61 billion vs INR 55 billion in Q3 FY24; RASK at INR 5.44 (+2% YoY)

    • CASK ex-fuel ex-forex at INR 2.90, stable sequentially but +10% YoY due to AOG costs and contractual escalations

    • Fleet reached 437 aircraft with 33 inductions in Q3; AOGs declined from 70s to 60s, expected to reach 40s by FY26 start

    • Free cash of INR 289 billion; acquired 3 ATR aircraft and 10 finance lease aircraft as cash utilization

    Concerns

    1

    • Large unrealized forex losses from rupee depreciation on $8 billion net USD exposure

    What Changed2

    vs Q4 FY25

    Guidance items6 → 5 (-1)Risks discussed5 → 4 (-1)

    Key financials

    Single quarter

    13 metrics
    1. 01Total Income₹23,000 Cr+15%YoY
    2. 02Net Profit (reported)₹2,450 Cr-18.3%YoY
    3. 03Net Profit (ex-forex)₹3,850 Cr+26%YoY
    4. 04Net Profit Margin (ex-forex)17.4%
    5. 05EBITDAR₹6,100 Cr+10.9%YoY

    Segment breakdown

    Network
    28% International ASK Share90 count Domestic Destinations38 count International Destinations2,200 count Daily Peak Flights
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Capacity
    Q4 FY25 ASK Growth
    ~20% YoY
    		High
    Capacity
    FY25 ASK Growth
    Early double digits
    		High
    Revenue
    Q4 FY25 PRASK
    Early single digit YoY moderation
    		Medium
    Fleet
    AOG Count by FY26 Start
    40s
    		High
    Product
    Stretch Aircraft Count
    45 aircraft on 10+ metro routes by end CY25
    		High

    Risks & concerns

    7
    RiskSeverity

    Large unrealized forex losses from rupee depreciation on $8 billion net USD exposure

    INR 14 billion MTM forex loss in Q3 alone from 2% rupee depreciation. Hedging covers only 60-70% of 12-month cash flows; balance sheet exposure extends 8-10 years. — Both acknowledged

    high

    CASK ex-fuel ex-forex up 10% YoY driven by AOG-related costs

    Grounding-related costs including damp leases and contractual escalations drove unit cost inflation. Expected to moderate as AOGs decline but timing uncertain. — Analyst acknowledged

    medium

    International yield pressure from intensifying competition

    Higher degree of yield moderation on international routes due to capacity addition intensity and foreign airlines increasing India operations. Domestic yields more resilient. — Management acknowledged

    medium

    Execution risk on IndiGoStretch business class rollout

    Product just 2 months old on limited routes. Revenue impact too early to quantify. Positive anecdotal reception but no load factor data shared. — Analyst downplayed

    low

    Areas of Evasion(3)

    • Exact AOG count within 60s range
    • Precise spread impact of AOG resolution
    • Stretch load factors

    Q&A highlights

    3

    “We are hedging all our positions for the next 12 months between a natural hedge and the forward instruments that we are taking up to 60%-70%”

    Net USD exposure of ~$8 billion means every 1 rupee move = INR 800 crore MTM loss; hedging only covers 12-month cash flows leaving long-term balance sheet exposed

    asked by Binay Singh (Morgan Stanley)

    2 min read5 chapters

    Detailed Narrative

    01

    Record Q3 Fueled by Festive Season Demand Surge

    IndiGo served a record 31 million passengers in Q3, up 13% YoY, with load factors above 90% for most of November and December. Total income grew 15% to INR 230 billion. The domestic market rebounded strongly from H1 softness caused by elections and heatwave, with industry achieving historic milestone of 5 lakh daily domestic passengers.

    02

    Forex Headwinds Mask Strong Operational Performance

    Reported net profit of INR 2,450 crores was depressed by INR 1,400 crores unrealized forex loss from 2% rupee depreciation. Excluding forex, profit grew 26% YoY to INR 3,850 crores at 17.4% margin. Net USD exposure stands at ~$8 billion across lease liabilities and maintenance obligations. Hedging strategy covers 60-70% of 12-month cash outflows, with INR 591 million gain recorded.

    03

    AOG Situation Improving but Cost Overhang Persists

    AOGs declined from 70s to 60s and expected to reach 40s by FY26 start. However, CASK ex-fuel ex-forex remained elevated at INR 2.90 (+10% YoY) due to damp lease costs and contractual escalations. Damp lease rates moderated from summer to winter seasons. Management estimates AOG resolution will improve RASK-CASK spread by single-digit points.

    04

    Strategic Expansion: Stretch Product and International Growth

    IndiGoStretch launched on Delhi-Mumbai (November) and Delhi-Bangalore (January) with positive market reception. Plan to reach 45 Stretch-configured aircraft across 10+ metro routes by end CY2025. International network expanded to 38 destinations with 28% ASK share. Management exploring wet-leased widebody for earlier long-haul entry, subject to regulatory approval.

    05

    Q4 Outlook: Strong Capacity Growth Against Low Base

    Q4 FY25 capacity guided at ~20% YoY growth, primarily due to low base from last year's sudden groundings. PRASK expected to moderate📎 early single digits YoY against high base when industry had supply constraints. Full year FY25 capacity guidance of early double-digit growth reaffirmed. January demand trends described as very strong.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.