Mumbai: Shares of InterGlobe Aviation Ltd closed at 16-month low after the company reported a 97% decline in its June-quarter net profit due to higher fuel prices and foreign exchange losses. At closing, the Indigo stock was at ₹ 929.05 on BSE —a level last seen on 20 March 2017, down 7.5% from previous close. So far this year, IndiGo shares fell 23%. India’s benchmark Sensex Index rose 0.3% to 37,606.58 points. IndiGo shares plunged as much as 11.30% in intraday trade on BSE to a low of ₹ 891.10.
Shares of rivals Jet Airways India Ltd and SpiceJet Ltd declined 3.1% and 5.8%, respectively.
Indigo reported a profit of ₹ 27.79 crore, down 97% from ₹ 811.14 crore a year ago. This was the sharpest drop in profit since the carrier listed on the local stock exchanges in November 2015. Revenue rose 14.5% to ₹ 6,818.34 crore from a year earlier
Its fuel expenses surged 54% in the June quarter to ₹ 2,715.6 crore. It incurred a foreign exchange loss of ₹ 250 crore during the quarter.
“We remain confident on INDIGO’s execution capabilities and profitability focus. However, rising crude oil prices in a highly competitive and price sensitive market will weigh on INDIGO’s profitability over FY19/20. Thus, we remain cautious on the stock" said Motilal Oswal in a note to its investors.
The brokerage firm has maintained its rating to neutral and lowered its target price by 10% to ₹ 903 a share.
The company reported strong 20% domestic passenger growth and 89% passenger load factor. Revenue per unit capacity declined 4% from a year ago while cost per unit capacity increased by 14% due to 30% increased in unit fuel cost.
“IndiGo’s profitability will remain under pressure for the rest of the fiscal year if jet-fuel prices stay elevated and competitive intensity in the Indian aviation market fails to recede. Rising jet-fuel prices and aggressive capacity expansion in a low-airfare environment will continue to cast shadows on margins in the near term" said Bloomberg Intelligent report.
Brokerage firm SBI Cap Securities expects that sustained pricing pressure coupled with continued high industry supply in the near term amidst rising costs will put pressure on Indigo’s profitability.
“Factoring in higher crude prices (USD70/B), the rupee at Rs67 and pressure on yields (0.5% YoY fall in FY19) we have cut our FY19e/FY20e EBITDAR by 27%/17% and arrive at a revised TP of Rs1,043 (Rs1,324 earlier) based on 9x FY20e EV/EBITDAR", SBI Cap Securities report said.
“We retain our BUY rating, but only an improvement in the industry pricing scenario (which appears remote at the moment) will be the key to near-term profitability and stock performance", SBI Cap report added.
Of the analysts covering the stock, 10 have a “buy" rating, seven have a “hold" rating, while four have a “sell" rating, showed Bloomberg data.