InvestorQ : Why did the stock of Interglobe Aviation fall so sharply on Friday in the NSE? Can I buy the stock at these prices?
sara Kunju made post

Why did the stock of Interglobe Aviation fall so sharply on Friday in the NSE? Can I buy the stock at these prices?

Answer
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10 months ago


The reason for the sharp fall in the stock price of Interglobe Aviation (owner of Indigo Airlines) was the extremely poor quarterly performance for the September quarter. Consider these numbers. Interglobe net loss for the September quarter widened to Rs.1,066 crore from Rs.652 crore in the same period last year. This is despite the fact that the crude oil prices did not really pose any problem for the airline. Business growth appears to be good because revenues from operations actually surged by 31% to Rs.8,105 crore. Let us look at what exactly led to this sharp rise in losses.

Indigo was hurt by higher expenses in the quarter. In addition, the sluggish economy is beginning to hit business travel. If you look at the expenses in the P&L account for the September quarter, it was up by 27.6% to Rs.9,577 crore. With a sharp increase in the number of aircraft, the depreciation and amortisation costs grew fivefold to Rs.1,029 crore. An ageing fleet is also an issue as aircraft repair and maintenance costs for the quarter nearly doubled to Rs.153 crore. However, as we said earlier, the fuel costs rose by a very modest 2.6% as compared to an 80% growth in fuel costs last year.

Regarding buying of fresh positions in Indigo, there are some basic things to remember. Remember, this quarter the problem is not cyclical crude issues. It is to do with more structural balance sheet issues. Also, the results come in the backdrop of escalating tussle between co-founders Rakesh Gangwal and Rahul Bhatia over corporate governance issues. This could be a hindrance for decision making and it is best to stay away till this issue is amicably sorted out.


user profile image
10 months ago


The reason for the sharp fall in the stock price of Interglobe Aviation (owner of Indigo Airlines) was the extremely poor quarterly performance for the September quarter. Consider these numbers. Interglobe net loss for the September quarter widened to Rs.1,066 crore from Rs.652 crore in the same period last year. This is despite the fact that the crude oil prices did not really pose any problem for the airline. Business growth appears to be good because revenues from operations actually surged by 31% to Rs.8,105 crore. Let us look at what exactly led to this sharp rise in losses.

Indigo was hurt by higher expenses in the quarter. In addition, the sluggish economy is beginning to hit business travel. If you look at the expenses in the P&L account for the September quarter, it was up by 27.6% to Rs.9,577 crore. With a sharp increase in the number of aircraft, the depreciation and amortisation costs grew fivefold to Rs.1,029 crore. An ageing fleet is also an issue as aircraft repair and maintenance costs for the quarter nearly doubled to Rs.153 crore. However, as we said earlier, the fuel costs rose by a very modest 2.6% as compared to an 80% growth in fuel costs last year.

Regarding buying of fresh positions in Indigo, there are some basic things to remember. Remember, this quarter the problem is not cyclical crude issues. It is to do with more structural balance sheet issues. Also, the results come in the backdrop of escalating tussle between co-founders Rakesh Gangwal and Rahul Bhatia over corporate governance issues. This could be a hindrance for decision making and it is best to stay away till this issue is amicably sorted out.