IndiGo to stay market leader despite hiccups; Motilal Oswal sees 22% upside

Last week, IndiGo CEO Pieter Elbers said to employees that the "worst is behind us," following widespread flight cancellations and disruption at airports across the country

InterGlobe Aviation Ltd. will remain the market leader at its current market share over the long term despite short-term disruptions, Motilal Oswal said, citing India’s travel and tourism growth story. 

 

The brokerage reiterated its 'Buy' rating on the airline with a target price of ₹6,300, implying a 22 per cent upside from the previous close. So far this month, IndiGo stock is down 12.6 per cent, while it's up 13.2 per cent this calendar year compared to a 10.5 per cent gain in Nifty50.  

 

Motilal Oswal said near-term challenges from operational disruptions, capacity cuts and rupee depreciation are expected to weigh on third-quarter financials, but these do not alter the airline’s long-term growth thesis. 

 

 

IndiGo's domestic network continues to be the backbone of its operations, supporting India's evolving travel and tourism landscape, while the expansion of international connectivity provides a natural hedge and supports margin improvement, it said.

 

Motilal Oswal expects the recent disruption, coupled with a further 10 per cent reduction in the winter schedule, to reduce third-quarter FY26 revenue by 10-12 per cent, with a sharper impact on profitability due to lower capacity. Higher costs related to cancellations, refunds, passenger compensation, regulatory penalties, a weaker rupee and rising aviation turbine fuel prices are likely to push up unit costs, it added.

 

As a result, IndiGo has lowered its third-quarter FY26 guidance, Motilal Oswal said. Capacity growth, measured in available seat kilometres, is now expected to be in the high single digits to low double digits year-on-year, compared with the high-teens growth anticipated earlier. Passenger revenue per available seat kilometre is likely to decline by mid-single digits year-on-year, versus flat to marginal growth expected previously.

 

The brokerage said the disruption has also affected customer sentiment and drawn increased regulatory scrutiny, though it has cut its revenue, Ebitdar and profit estimates by a relatively modest 2 per cent, 6 per cent and 18 per cent, respectively, as lower capacity and higher costs were already factored into its forecasts.

 

Despite near-term pressures, Motilal Oswal said IndiGo's leadership position remains intact, supported by its over 60 per cent domestic market share, strong fleet expansion pipeline, addition of new domestic and international destinations, efficient on-time performance and competitive pricing. While disruptions may create opportunities for rivals in the short run, the brokerage expects IndiGo to retain its dominance over the long term.

 

Last week, Chief Executive Officer (CEO) Pieter Elbers said to employees that the "worst is behind us," following widespread flight cancellations and disruption at airports across the country. Earlier this month, IndiGo cancelled more than 4,200 flights, which is equivalent to nearly 23 per cent of the over 2,300 flights that the company was scheduled to fly daily in December 2025.  

Further, IndiGo joined the Sensex on Monday, replacing Tata Motors Passenger Vehicles, a move expected to boost investor sentiment and drive incremental inflows from passive funds.