InterGlobe Aviation, the parent company of budget carrier Indigo, has achieved a significant milestone by becoming India’s first aviation company to surpass a market capitalisation of ₹1.01 lakh crore. The company’s shares reached a record high with a 29-per cent increase so far this year, reaching ₹2,634.25 on the BSE. This surge in value represents a rally of nearly 38 per cent since March 28.

Indigo’s recent stock performance can be attributed to several factors. First, investors have shown optimism regarding the airline’s expanding market share following Go Air’s declaration of insolvency. Furthermore, the announcement of Indigo’s massive order for 500 Airbus A320 family aircraft, the largest single-aircraft purchase order ever made by an airline with Airbus, has attracted significant interest from investors. This order surpasses the previous record set by Tata-owned Air India, which ordered 470 aircraft in March.

Among the listed Indian aviation companies, only Indigo, SpiceJet, and the now-defunct Jet Airways are currently trading. SpiceJet currently has a market capitalisation of ₹1,646.05 crore, while Jet Airways, despite its defunct status for over four years, still holds a market cap of ₹552 crore.

Global elite club

According to reports, Indigo’s market value now also ranks it among the top-10 listed aviation firms globally, securing the 10th position. The world’s largest airline by value is Delta Airlines Inc, with a market capitalisation of $29.62 billion, followed by South West Airlines Co and Ryanair Holdings PLC. United Airlines Holdings PLC and Air China claim the fourth and fifth positions, respectively, followed by Singapore Airlines, China Southern Airlines, China Eastern Airlines Co, and Deutsche Lufthansa.

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Indigo’s market share within the Indian aviation sector has witnessed significant growth, rising 60 per cent, or 390 basis points, in May. This followed an increase of 70 basis points in April, 90 basis points in March, and 130 basis points in February. In May, the low-cost carrier transported 81.10 lakh passengers.

Analysts bullish

Arun Kejriwal, founder of Kejriwal Research, expressed confidence in Indigo’s ability to sustain its growth. He highlighted that even at its peak, Jet Airways failed to achieve one-third of Indigo’s current market capitalisation. He commended Indigo for securing a 60 per cent market share and for finalising the largest aircraft deal in the history of the Indian aviation industry. However, he noted that doubling the market cap to ₹2-lakh crore would be challenging, given current factors such as crude pricing and intensifying competition.

Despite these considerations, brokerage firm UBS has raised its target price for Indigo to ₹3,300 from the previous target of ₹2,690. UBS believes that Indigo is well-prepared to navigate any downturns and can manage fluctuations in crude prices or the US dollar without significant cash burn.