InterGlobe Aviation (IndiGo Airlines), the market leader in the domestic skies, delivered record profit of Rs 1,990 crore (53 per cent growth y-o-y) in the FY16 results posted after market hours last Friday. But this did not impress the market. The stock is down about 6 per cent in today’s trade. That’s because the profit in the March quarter (Rs 579 crore) barely budged compared with the year-ago period — a far cry from the robust 24 per cent growth in the December 2015 quarter.
The lacklustre show in the March quarter was despite operating income nudging up about 7 per cent, other income rising more than 20 per cent and fuel cost, the airline’s major expense, dipping nearly 15 per cent year-on-year.
To blame primarily is the sharp 40-plus per cent increase in employee cost, nearly 25 per cent rise in other expenses, including aircraft and engine rentals, and 50-plus per cent rise in depreciation cost — similar to the December quarter. An increase in employee strength to cater to the airline’s expansion plans, lease of aircraft to make up for the delay in the delivery of fuel-efficient A320neos, and weakness in the rupee seem to have contributed to higher costs.
But unlike the December quarter when revenue growth was in double-digits, high competition caused fares to dip sharply and revenue growth to moderate in the March quarter. Also, the March quarter is not among the best for the sector, unlike the December quarter. So, despite the airline growing its seat capacity and passenger numbers more than 20 per cent, passenger revenue growth was in single-digits in the March quarter.
The airline has started taking delivery of the A320neos — this has removed a major overhang which had contributed to the stock nosedive after the December quarter results. Another factor which had impacted the stock then was weak September quarter results. While the stock has recovered smartly since, a not-so-great performance in the March quarter seems to have again revived market worries. The final dividend of Rs 15 a share will provide some comfort to those who chafed at the massive dividend payout to the promoters before the airline’s IPO in October 2015.