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Interglobe Aviation LtdQ3 FY23

Interglobe Aviation Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 3
Future growth expectations for IndiGo in sales, revenue, and volumes based on the document: - Robust demand outlook with passenger numbers in H1 FY24 at 52 million, 41% higher than pre-Covid levels, aiming for 100 million passengers in FY24. - Capacity growth guidance for FY24 is in the north of mid-teens percentage, with plans to add approximately one aircraft per week in FY25. - Continued expansion of international network (26% of ASKs currently international), with new destinations like Bali and Medina planned. - Load factors remain strong (~83%), supporting yield recovery expected in Q4 FY24. - Revenues increased 21% YoY in Q2 FY24 despite some softness in yields. - Mitigation measures to counter aircraft groundings ensure capacity targets and help sustain growth. - Maintaining conservative capacity guidance amid uncertainties but confident in long-term capacity doubling by 2030. These indicators suggest solid volume and revenue growth prospects over the near to medium term.

Margin guidance

Category 3
  • IndiGo reported a net profit of Rs. 1.9 billion in Q2 FY24, a significant turnaround from losses five years ago.
  • The airline remains confident in meeting its FY24 capacity growth guidance of north of mid-teens percentage growth.
  • Long-term capacity guidance aims to double the airline's size by 2030.
  • Mitigation plans are in place to manage aircraft groundings due to Pratt & Whitney engine issues, with expectations to maintain planned capacity and financial goals.
  • EBITDAR margin improved to around 16% in Q2, supported by revenue growth despite yield softness and reduced fuel costs.
  • Operational profit excluding foreign exchange loss was Rs. 8.1 billion in Q2 FY24.
  • Growth drivers include expanding international routes (currently 26% of available seat kilometers are international) and acquiring additional aircraft, including secondary market leases.
  • No specific future earnings or EPS guidance was provided; however, management expects positive momentum supported by strong demand and capacity expansions.

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Fundraise plans

Yes
  • IndiGo is currently diversifying its sources of financing to support its large order book of around 980 aircraft.
  • The company is in the process of setting up an aircraft leasing unit in GIFT City, Gujarat, aimed at enhancing access to capital from lessors worldwide, subject to regulatory approvals.
  • IndiGo has leased 2 aircraft on finance lease in the recent quarter.
  • Given the healthy free cash position (₹180.8 billion as of September quarter), IndiGo is considering purchasing certain aircraft and related assets in the coming quarters.
  • No explicit mention of new equity fundraising was made.
  • The focus appears to be on capitalizing on debt and lease financing options, along with strategic investments and expanding leasing capabilities through the new GIFT City entity.

Order book

Yes
  • IndiGo currently has a large order book of around 980 aircraft to be delivered over the coming decade.
  • The order book includes a very sizable number of aircraft with deliveries expected at a rate of about one new plane per week throughout next year.
  • IndiGo is confident in Airbus's ability to deliver as scheduled and would welcome any expedited deliveries.
  • The carrier has also leased two aircraft on finance lease recently and is considering purchasing certain aircraft and related assets in upcoming quarters.
  • IndiGo is setting up an aircraft leasing unit in GIFT City, Gujarat, to diversify financing sources and enhance access to capital from lessors worldwide.

Capex plans

Yes
- IndiGo is making investments in hangars at Delhi and Bangalore. - Planning to buy aircraft, starting with smaller ATR aircraft, in the coming quarters using capital. - Considering purchase of associated assets such as engines on a cash basis for long-term benefit. - Setting up an aircraft leasing entity in GIFT City, Gujarat, to diversify capital sources and gain tax benefits; this entity will be a profit center intended for aircraft financing. - Leased 2 aircraft on finance lease in the recent quarter. - Looking at additional CEO aircraft acquisitions expected from secondary markets starting January 2024. These initiatives reflect a strategic capital deployment to enhance fleet capacity, financing options, and asset ownership over time.

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