IndiGo shares fall 6% after posting losses for the seventh consecutive quarter

Reacting to earnings, the stock fell nearly 6% on the NSE in early trade on Friday.

Analysts at Prabhudas Lilladher Ltd said in a report, “IndiGo’s Q2 losses eased sequentially as the industry witnessed a faster recovery after the second Covid wave, fueled by increased consumer confidence with lower Covid incidence, increasing number of vaccinations And it happened because of relaxation in state testing norms.”

Its yield, which is a measure of the average fare per passenger per kilometer, increased ₹4.19 kms in Q2FY22 ₹3.70. The company’s management said in a post-earnings conference call that the yields were higher due to slowdown in demand in the international market. Management said that these international yields remained at high levels.

Investors would have to believe that the government allowed airlines to increase their capacity from 72.5% to 85% in September. From October, airlines have been allowed to operate at full capacity. According to the company’s management, its revenue is rapidly returning to normalcy, and the company plans to deploy capacity in a responsible manner.

The management highlighted that the revenue booked in October, i.e. ticketing for November-December has reached pre-covid levels, with a PLF of 76%. Also, cash burn per day decreased by 39% sequentially ₹20 crore in Q2FY22, the management said.

Further, the management said that tier-II and -3 cities have shown strong growth and as corporates recover, there is an opportunity to add more capacity on metro-metro routes.

On the other hand, analysts cautioned that rising crude oil prices continue to be a concern for the stock.

“With demand recovering faster than expected (corporate travel has recovered to 50% as compared to January 2020 levels. It expects higher travel after Diwali as more offices open), on normalization of yields. The concerns remain unanswered. This, combined with higher fuel prices, will prove to be a double whammy for the stock in the near term, analysts at Motilal Oswal Financial Services Ltd said in a report.

That said, IndiGo is in a better position than the competitors. “We believe IndiGo remains in a better position than its peers and has the potential to emerge stronger post-Covid, given the improved balance sheet. ₹6,300 crore free cash) with an option to further strengthen ₹3,000 crore through QIP, industry leading cost structure and strong management team,” Prabhudas Lilladher added in the report.