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

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.

InterGlobe Aviation (IndiGo) reported muted December quarter (Q3) numbers for 2025-26 (FY26) as a bout of operational disruptions and sharp foreign exchange (FX) losses weighed on headline profitability. This came 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. They cited 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 the 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 Research said IndiGo’s operating profit before rental costs stood at ₹5,860 crore, broadly flat Y-o-Y and largely in line with estimates.

 

Adjusted profit came in slightly below expectations.  ALSO READ | Ujjivan SFB shares hit new high; jumps 7% as analysts hike target post Q3

 

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”.

 

It stressed that the quarter was affected more by one-offs than by any structural weakness in demand or margins. Passenger load factor and yields fell due to the December disruptions, it said, rather than any broad-based slowdown in travel demand.

 

A key theme across brokerages was the outlook for costs. The 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 also relied more on damp and wet leases to maintain operations, adding to near-term cost pressures.

 

JM Financial Research said CASK ex-fuel and ex-forex rose modestly Y-o-Y in the quarter. It is expected to scale up further in FY26 due to higher foreign exchange exposure, damp lease costs and moderated capacity growth.  ALSO READ | Syngene International falls to over 2-year low as Q3 net profit slumps 89%

 

Motilal Oswal Research cut its FY26 operating profit before rental costs estimate by 10 per cent to reflect these pressures, while largely retaining its medium-term forecasts.

 

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.

 

The management has announced $820 million investment through its GIFT City entity for aviation asset acquisition. This is 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.

 

Most brokerages reiterated positive ratings on the IndiGo stock, albeit with some moderation in near-term earnings expectations.

 

Motilal Oswal Research maintained a ‘buy’ rating with a target price of ₹6,100, valuing the stock at 9 times its FY28 estimated operating profit before rentals.

 

It expects revenue, operating profit before rentals 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’ (from ‘reduce’), citing a sharp correction and largely identifiable downside risks.

 

Operational disruptions and currency volatility have clouded near-term performance.

 

But 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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