InterGlobe Aviation advances 5%, hits over seven-month high

Shares of InterGlobe Aviation (IndiGo) moved higher by 5 per cent, hitting an over seven-month high of Rs 1,393 on the BSE in intra-day trade on Friday. The stock of the airline company was trading at its highest level since February 26, 2020.

In the medium-to-long term, once the Covid-related crisis is over, the demand outlook for aviation remains very strong in India, largely driven by under-penetration, rise in the working population, and expansion of the middle class, the company said in its annual report. 

Furthermore, the rise in trade and tourism is also likely to boost the industry. Based on the recent data published by the Civil Aviation Administration of China (“CAAC’”), daily flights in China have recovered by 43 per cent as of April 21, 2020, as compared to March 2020. Thus, although the Covid-19 outbreak will have a near-term negative impact, aviation in India should gradually recover and get back on track for rapid growth, IndiGo’s management said in the 2019-20 annual report.

The company said it has taken a number of actions to mitigate the impact and risks of Covid-19 to its business. These actions include cost reduction initiatives, liquidity enhancement, capacity reduction, and improvement in the fleet mix.

"We have planned a phased ramp-up of capacity in line with demand expectations going forward. Basis this, we aim to deploy around 60-70 per cent capacity in the third quarter of FY2021, on a year-over-year (YoY) basis. Given the uncertainty of the environment we will continue to monitor these plans and make adjustments on the basis of demand, as required," it said.

Meanwhile, in the past three months, it has outperformed the market by surging 35 per cent, as analysts upgraded the stock from 'sell' to 'buy'. In comparison, the S&P BSE Sensex was up 9.6 per cent during the same period.

Kotak Institutional Equities in September upgraded the stock from ‘sell’ to ‘buy’ and increased its fair value assessment from Rs 900 to Rs 1,520. The brokerage firm expects pressures on cost and yield to recede for the aviation sector beyond a tough FY21. "IndiGo to re-establish its lead over peers in terms of spread, and the firm to continue driving double-digit growth for air travel for long," the brokerage firm said. 

At 11:26 am, the stock was trading 3 per cent higher at Rs 1,367 on the BSE, against a 0.79 per cent rise in the S&P BSE Sensex. A combined 2.1 million equity shares were changing hands on the counter on the NSE and BSE.