IndiGo Q3 weathers disruptions, FX hit; analysts upbeat on long-term growth

InterGlobe Aviation (IndiGo) reported a muted December quarter (Q3) results of financial year 2026 (FY26) as a brief bout of operational disruptions and a sharp foreign exchange (FX) loss weighed on headline profitability, even as underlying demand and core operating metrics remained resilient. 

 

Brokerages, while trimming near-term estimates, remain broadly constructive on the airline’s longer-term prospects, citing its scale advantage, balance-sheet strength and international expansion.

 

For the third quarter of FY26, IndiGo’s reported profit fell sharply year-on-year (Y-o-Y), largely due to exceptional costs linked to new labour codes and passenger compensation during disruptions in early December, alongside a forex loss of about ₹1,100 crore. Adjusted for these items, performance was closer to expectations, with operating indicators broadly stable.

 

Motilal Oswal said IndiGo’s Ebitdar stood at ₹5,860 crore, broadly flat year-on-year (Y-o-Y) and largely in line with estimates, while adjusted profit came in slightly below expectations. Revenue rose 6 per cent to ₹23,470 crore, driven by capacity growth and steady traffic, though yields moderated marginally on a high base.

 

Elara Capital noted that the reported earnings decline “materially understates underlying performance”, stressing that the quarter was affected more by one-offs than by any structural weakness in demand or margins. Passenger load factor and yields dipped due to the December disruptions, it said, rather than any broad-based slowdown in travel demand.

Costs rise as capacity moderates

A key theme across brokerages was the outlook for costs. Management has guided for a mid-single-digit increase in cost per available seat kilometre (CASK), excluding fuel and forex, in FY26. This is being driven by a weaker rupee, higher dollar-denominated expenses such as aircraft leases and maintenance, and lower fixed-cost absorption following capacity moderation.

 

IndiGo curtailed some domestic operations during the winter schedule as it adjusted to Flight Duty Time Limitation (FDTL) norms and managed aircraft-on-ground issues linked to global engine supply constraints. The airline has also relied more on damp and wet leases to maintain operations, adding to near-term cost pressures.  ALSO READ | Syngene International falls to over 2-year low as Q3 net profit slumps 89% 

JM Financial said CASK ex-fuel and ex-forex rose modestly Y-o-Y in the quarter and is expected to scale up further in FY26 due to higher foreign exchange exposure, damp lease costs and moderated capacity growth. Motilal Oswal cut its FY26 Ebitdar estimate by 10 per cent to reflect these pressures, while largely retaining its medium-term forecasts.

International push and strategic bets

Despite near-term headwinds, brokerages highlighted IndiGo’s strategic initiatives as key positives. The airline expects capacity growth of around 10 per cent in the March quarter, skewed towards international routes, while domestic operations remain the backbone of the network.

 

Management has announced an $820 million investment through its GIFT City entity for aviation asset acquisition, part of a broader strategy to manage foreign exchange exposure and build owned assets. The number of owned aircraft has already increased sharply over the past year.

 

Elara Capital underscored the launch of the Airbus A321XLR as a “step-change” in IndiGo’s international economics, enabling entry into long, thin routes with lower breakeven loads and reduced capital risk. International expansion, along with overseas revenue, is also expected to act as a natural hedge against a weak rupee over time.

 

Emkay Global said the airline’s long-term growth targets remain intact, with international volume growth likely to outpace domestic growth. It expects a gradual improvement in operations as disrupted capacity is restored and supply chain issues ease.  ALSO READ | Ujjivan SFB shares hit new high; jumps 7% as analysts hike target post Q3

Valuations and outlook

Most brokerages reiterated positive ratings on the IndiGo stock, albeit with some moderation in near-term earnings expectations. Motilal Oswal maintained a ‘Buy’ rating with a target price of ₹6,100, valuing the stock at 9x FY28 estimated Ebitdar, and expects revenue, Ebitdar and adjusted profit to grow at compound annual rates of 12 per cent, 13 per cent and 10 per cent, respectively, over FY25-28.

 

Elara Capital retained its ‘Buy’ call with a target price of ₹6,020, rolling forward valuations to FY28, while Emkay Global maintained a target of ₹6,300 based on earnings multiples. JM Financial, while cutting near-term earnings estimates more sharply due to currency assumptions, upgraded the stock to ‘Add’ (‘Reduce’ earlier), citing a sharp correction and largely identifiable downside risks.

 

That said, while operational disruptions and currency volatility have clouded near-term performance, analysts agree that IndiGo’s structural advantages, strong demand environment and international growth strategy position it well once one-off pressures fade.

   

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