Active Stocks
Sat May 18 2024 12:49:03
  1. Tata Motors share price
  2. 952.95 0.76%
  1. Power Grid Corporation Of India share price
  2. 316.85 1.12%
  1. Tata Steel share price
  2. 167.90 0.39%
  1. ITC share price
  2. 436.50 -0.02%
  1. State Bank Of India share price
  2. 821.30 0.42%
Business News/ Companies / Company Results/  IndiGo flies high in Q1 amid falling-out between promoters

IndiGo flies high in Q1 amid falling-out between promoters

IndiGo improved its bottom line in the June quarter on account of higher sales and improved margins
  • The improvement in bottomline is on account of higher sales and improved margins while jet fuel price turned softer
  •  (Reuters)Premium

    NEW DELHI : InterGlobe Aviation Ltd, which operates India’s largest airline, IndiGo, on Friday reported its highest ever quarterly profits, benefiting from the collapse of Jet Airways and showing resilience in the face of a bitter confrontation between founder Rahul Bhatia and his estranged partner Rakesh Gangwal.

    View Full Image

    IndiGo’s net profit stood at 1,203 crore in the quarter ended June, an almost 43-fold jump from the measly 27 crore in the corresponding quarter last year. The airline’s chief executive officer, Ronojoy Dutta, said the surge in net profit was due to strong passenger revenues and a sharp improvement in cargo performance.

    After a board meeting on Friday, Dutta also told analysts that the board will discuss the differences between major shareholders and the articles of association of the company on Saturday.

    He, however, clarified that the differences between the major shareholders—Bhatia and Gangwal—pertained to only a shareholder agreement between them, and will not affect the company’s strategy for growth and expansion.

    “The board is having a fulsome discussion on all issues. We obviously had a number of committee meetings today, including the audit committee, and the board discussed a whole range of issues and it will continue to do so tomorrow," said Dutta.

    The discussions at the board level are expected to iron out the differences between shareholders.

    Capital market regulator Securities and Exchange Board of India (Sebi) and the ministry of corporate affairs (MCA) had sought explanations from the company on the charges of corporate governance lapses raised by Gangwal earlier this month.

    If the differences are not settled quickly, the dispute could dent investor confidence in the airlines, delay decisions on key issues, invite avoidable regulatory attention and force the carrier to cede space to rivals.

    Dutta said the company was making a submission to Sebi on Friday and would respond to the MCA’s queries by the end of next week.

    “We have said many times, when it comes to overall strategy on growth and international expansion, etc., the promoters are totally in sync. We have confirmed that again at the board meeting today. The only issue of disagreement is the agreement between the promoters. It has nothing to do with the company and the strategy," Dutta said.

    Industry experts said prolonged differences between two large shareholders could lead to uncertainty in the minds of the employees, vendors and customers.

    “In the services industry, such issues also dent the brand and reputation of the company which takes years to rebuild. Also, lenders, especially for a high-capex business like airlines, start getting concerned and may pull back. The best solution would be to rework the terms of agreement, or one of them should exit," said Tarun Bhatia, managing director and head, South Asia, Kroll, a risk advisory firm.

    IndiGo improved its bottomline on account of higher sales and improved margins.

    The fact that jet fuel prices remained softer and the domestic currency was firm in the June quarter compared to the year-ago period, also helped.

    Sales jumped 44.7% from the year-ago period to 9,420 crore in the June quarter. IndiGo’s sales and market share have been steadily increasing in the recent past, following the grounding of rival Jet Airways in April.

    IndiGo’s share in the domestic market rose from 39.7% in January 2018 to 48.1% in June 2019, giving it the unique position of controlling half of India’s air travel market. It ferried 6 million passengers during May 2019 compared to 4.6 million in January 2018. After posting net losses of 652 crore in the September 2018 quarter, on account of a weak rupee and high jet fuel prices, the carrier climbed back spectacularly in the subsequent two quarters to end the March 2019 quarter with 590 crore net profit, up by over 400% from a year ago.

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed - it's all here, just a click away! Login Now!

    Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
    More Less
    Published: 19 Jul 2019, 04:26 PM IST
    Next Story footLogo
    Recommended For You