Equity Research

INDIA
November 7, 2022
BSE Sensex: 60950
InterGlobe Aviation BUY
ICICI Securities Limited
is the author and Maintained
distributor of this report
Potential for significant profit in Q3FY23; remain
positive on supply demand cycle. Rs1,798
Aviation InterGlobe Aviation (IndiGo) is benefitting from strong traffic and benign
competition
 while cost pressures remain high. The commentary on fares/traffic is
Q2FY23 result review also very strong. As such, Q2FY23 result was in line with adjusted loss of Rs3.8bn
and earnings revision and spread of Rs0.44 per ASK (RASK less operating CASK). We remain positive on
supply-demand cycle, which will remain tight as per our analysis in medium term
Target price: Rs2,360 (link). Additionally, within reasonable fare/cost assumptions, we expect Q3FY23E
PBT to be more than Rs15bn. Maintain BUY with an unchanged target price of
Earnings revision Rs2,360 based on 25x FY24 EPS of Rs94.4. Risks include commodity/currency
(%) FY23E FY24E driven cost headwinds and any cost overrun due to supply-chain issues.
Revenue  6.0  14.0
EBITDA  8.0  2.0  Maintain BUY. We factor Rs4.72/5.10 RASK in FY23/24E. We factor as fuel/ex-fuel
PAT  113.0  0.0 CASK of 2.16/2.52 in FY23 and 2.16/2.66 in FY24E, respectively. These are based
on ~INR/US$ of 80 each and US$/bbl of 110/100 in FY23/24E, respectively.
Shareholding pattern  A relatively better Q2 underlines high demand and a strong business position.
Mar Jun Sep Q2FY23 yields (company calculation) were above Rs5 at a load factor of ~79%, which
’22 ’22 ’22 is a good combination. While historically, Q2 unit revenue reductions are ~10-15% vs
Promoters 74.8 74.8 71.9
Institutional Q1, this was only 2.6% in Q2FY23. This reflects better supply-demand equation.
investors 23.2 23.1 25.8 RASK outlook remains constructive with traction from all segments including
MFs and others 3.7 4.6 5.5
FIs/Banks 1.5 1.5 1.8 international inbound and all corporate traffic.
FIIs 18.0 17.0 18.5
Others 2.0 2.1 2.3
 Currency and fuel remain major headwinds. Fuel CASK increased 4% to
Rs2.26/ASK and non-fuel CASK increased by 4% QoQ to Rs2.52/ASK in Q2FY23.
ESG disclosure score  International segment firming up significantly. IndiGo’s international operations
Year 2020 2021 Chg
increased by ~20% as compared to Q1FY23 (PAX and ASK up 22% QoQ, PLF
ESG score 38.1 37.4 (0.7)
Environment 9.5 11.5 2.0 improved from 78% in Q1FY23 to 79% in Q2FY23). IndiGo has strengthened its
Social 26.0 21.8 (4.2) international network by introducing new flights and frequencies to international routes
Governance 78.6 78.6 -
Note - Score ranges from 0 - 100 with a higher score
and added Ras Al-Khaimah as its 100th destination. It has signed a new code share
indicating higher ESG disclosures. agreement with the Virgin Atlantic. This will allow IndiGo to access new markets from
Source: Bloomberg, I-sec research
London’s Heathrow airport to India. Increased internalisation is one of the key
strategies for IndiGo ahead.
 Cargo operations witness volume growth with network presence, and
management remains optimistic. Cargo capacity will be further augmented with the
introduction of the first Airbus 321 freighter and IndiGo is also expecting second such
aircraft to be operational by Dec’22. The dedicated freighter operations diversify the
business while maintaining cost metrics considering that these aircraft are on
operating leases and similar to the existing Airbus A320 family. Focus cargo markets
include China, Vietnam, Middle East and certain CIS countries.
Market Cap Rs693bn/US$8.4bn Year to March FY21 FY22 FY23E FY24E
Reuters/Bloomberg INGL.BO/INDIGO IN Revenue (Rs mn) 1,46,406 2,59,309 5,28,028 6,56,403
Research Analysts: Shares Outstanding (mn) 385.4 Net Income (Rs mn) (63,294) (52,210) 16,271 36,368
52-week Range (Rs) 2364/1549 EPS (Rs) (164.4) (135.5) 42.2 94.4
Ansuman Deb
ansuman.deb@icicisecurities.com Free Float (%) 28.1 % Chg YoY nm nm nm 123.5
+91 22 6807 7312 FII (%) 18.5 P/E (x) nm nm 42.6 19.1
Ravin Kurwa Daily Volume (US$/'000) 19,667 CEPS (Rs) (42.3) (4.0) 169.6 250.1
ravin.kurwa@icicisecurities.com
+91 22 6807 7653 Absolute Return 3m (%) (9.5) EV/E (x) nm nm 6.1 3.4
Absolute Return 12m (%) (17.2) Dividend Yield (%) - - - -
Sensex Return 3m (%) 4.9 RoCE (%) (10.5) (10.6) 10.5 14.7
Sensex Return 12m (%) 2.8 RoE (%) nm nm nm nm

Please refer to important disclosures at the end of this report

 InterGlobe Aviation, November 7, 2022 ICICI Securities
 Supply-chain disruptions is another overhang, can have cost implications as
seen in FY20. Post covid, there have been supply-chain disruptions in aircraft
manufacturing and subsequent shortage of spare engines worldwide. This has
affected IndiGo’s operations due to grounding of aircraft and has impacted its ability
to fully deploy capacity productively. IndiGo is looking at various options to mitigate
the shortfalls in capacity deployment such as slowing down redeliveries, exploring
introduction of aircraft into the fleet and adding capacity on ACMI (agreement
between lessor and lessee to provide aircarft, crew, maintenance and insurance)
basis. We had seen major escalations in supplementary rentals in FY20 due to
extension of lease periods. As such, this is a concern.
 Constructive Q3FY23 outlook-we believe Q3FY23 PBT could be more than
Rs15bn: Management believes domestic demand will continue to rise in the
upcoming festive and winter season. International air travel has also demonstrated
strong recovery, which is likely to continue. In Q3FY23 (so far), IndiGo is witnessing
a good momentum in demand parameters and an uptick in revenue metric.
 We factor 25% YoY increase in ASK in line with the management guidance in
Q3FY23.
 Our Q3 fare estimate (Passenger Revenue/passenger) is Rs5,750, only 2%
higher QoQ, while historically Q3 fares have been higher than Q2 by 8% QoQ
between FY16-20.
 We expect a sequential dip in ATF prices which will result in fuel CASK to
decrease from Rs2.26/ASK in Q2FY23 to Rs2.08/ASK in Q3FY23. This in the
back of Q2FY23 average ATF price being ~Rs131k while the same was Rs118k
in Oct’22 and Rs122k on Nov’22. We are estimating Rs120k average for
Q3FY23E.
 Ex-fuel CASK is expected to remain flat QoQ at Rs2.5/ASK. This can go down
with higher utilizations.
 Ancillary revenue as %age of total revenue has been assumed at 11% at levels
similar to Q2FY23.

Key conference call takeaways

 Passenger and capacity numbers to grow QoQ. FY23 ASK growth to be in the range
of 13-17%. This is in line with expectations.
 Supply-chain issues can be a challenge as seen in FY20. The company is resorting
to wet leases, delay in returning and other ways to fulfil its volume growth guidance.
Cost overruns due to lease tenure extensions can be a problem as seen in FY20.
 Per ASK cost can improve ahead with utilisations.
 October fares have been higher than Q1FY23.
 There will be total four freighters in medium term for IndiGo. While two will be
inducted by CY2022 end, the remaining two will be inducted in early FY24. These
will boost ancillary revenue and will initially cater more to international segments.
 Most leases are fixed rate for IndiGo and as such, negotiations (up/down) will only
impact the new treaties. However, new treaties will be higher due to currency
depreciation.
 The fare and passenger demand outlook remains strong. There is demand from all
segments including international inbound and corporate sectors.
 Internationalisation of the fleet is a strategic objective for IndiGo ahead.

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 InterGlobe Aviation, November 7, 2022 ICICI Securities
Table 1: Q2FY23 result review
(Rs mn) Q2FY23 Q2FY22 Y-Y(%) Q1FY23 Q-Q(%)
Total operating Income 1,24,976 56,085 122.8 1,28,552 (2.8)

Fuel 62,579 19,894 214.6 59,900 4.5

Net Rentals 485 649 (25.3) 653 (25.8)
Supplementary Rentals 18,393 14,620 25.8 18,853 (2.4)
Stock 610 163 726
Change in inventory 15 10 (11)
Employee 11,537 8,024 43.8 10,583 9.0
Other Expenses 19,069 11,157 70.9 17,618 8.2
Foreign Exchange (gain)/loss 12,015 (342) 14,246
Total operating Expense 1,24,703 54,175 130.2 1,22,567 1.7

EBITDA 273 1,910 5,985 (95.4)

(Margin%) 0.2 3.4 4.7

EBITDAR 758 2,559 (70.4) 6,638

(Margin%) 0.6 4.6 5.2

Other Income 3,547 1,902 86.5 1,635 116.9

Depreciation 12,377 12,481 (0.8) 11,697 5.8
Finance Costs 7,276 5,688 27.9 6,566 10.8
Exceptionals - - -
EBIT (8,557) (8,668) (1.3) (4,076)
PBT (15,833) (14,357) 10.3 (10,642)
Tax 1 - 0
PAT (15,833) (14,357) (10,643)
Adjusted PAT ( adjusted for
forex) (3,818) (14,699) 3,603
Source: Company data, I-Sec research,
Table 2: Quarterly operating parameters
Q2FY23 Q2FY22 Y-Y(%) Q1FY23 Q-Q(%)
Total ASK (‘000) 2,77,00,000 1,58,00,000 75.3 2,75,00,000 0.7
PLF (%) 79.1 71.1 79.6
PAX Revenue (Rs mn) 1,11,104 47,163 135.6 1,14,669 (3.1)
Ancillary revenue (Rs mn) 13,872 8,522 62.8 13,883 (0.1)
PAX RASK 4.01 2.99 34 4.17 (3.8)
Fare (Rs) 5,640 4,249 32.7 5,487 2.8
Passengers(mn) 19.7 11.1 77.5 20.9 (5.7)
Source: Company data, I-Sec research
Table 3: Net cash trend of IndiGo
Rs mn Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22
Free Cash 56,207 63,516 78,141 77,632 83,037 82,442
Restricted Cash 1,14,472 1,02,023 95,048 1,04,644 1,07,657 1,14,164
Total Cash 1,70,679 1,65,539 1,73,189 1,82,276 1,90,694 1,96,606

Debt excluding capitalized operating lease liability 57,566 47,727 43,889 52,122 48,036 48,174
Capitalized operating lease liability 2,59,335 2,75,626 3,07,645 3,16,656 3,44,740 3,61,277

Net frees cash -1,359 15,789 34,252 25,510 35,001 34,268

Source: Company data, I-Sec research
Table 4: Key operating parameters trend
(Rs mn) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23
ASK(bn) 23.3 24.2 25.8 23.0 2.1 8.9 15.3 19.2 11.2 15.8 23.0 20.4 27.5 27.7
RPK(bn) 20.7 20.2 22.6 19.0 1.3 5.8 11.0 13.5 6.6 11.2 18.3 15.6 21.9 21.9
Load Factor(%) 89.0 83.5 87.6 82.8 61.3 65.1 71.9 70.3 58.9 71.1 79.6 76.7 79.6 79.1
RASK 4.0 3.4 3.9 3.6 3.7 3.1 3.2 3.2 2.7 3.5 4.1 3.9 4.7 4.5
CASK with depreciation
3.6 3.8 3.7 3.9 18.6 5.3 3.9 3.9 5.3 4.6 4.1 4.5 4.6 4.8
and interest
CASK with depreciation
2.2 2.5 2.4 2.6 18.0 4.6 3.2 2.9 4.3 3.3 2.7 3.0 2.4 2.5
and interest ex fuel
RASK - CASK 0.47 -0.42 0.11 -0.27 -14.97 -2.24 -0.69 -0.61 -2.65 -1.05 -0.02 -0.61 0.07 -0.27
Fuel (Rs/ASK) 1.3 1.3 1.3 1.2 0.6 0.7 0.7 1.0 1.1 1.3 1.4 1.6 2.2 2.3
RPK/Pax 1,104.8 1,091.1 1,113.1 1,120.2 1,053.5 1,054.5 1,047.6 1,038.5 1,056.0 1,009.0 1,028.1 1,071.4 1,047.8 1,111.7
Pax Revenue 84,451.0 71,108.0 87,703.0 71,309.0 5,854.0 22,082.0 40,693.0 49,741.0 22,976.0 47,163.0 80,703.0 68,847.0 1,14,669.0 1,11,104.0
Ancillary revenue 9,749.6 9,943.9 11,613.9 11,681.6 1,813.4 5,327.6 8,406.8 12,488.5 6,693.1 8,522.0 11,844.7 10,960.5 13,883.2 13,872.0
Total Revenue 94,200.6 81,051.9 99,316.9 82,990.6 7,667.4 27,409.6 49,099.8 62,229.5 29,669.1 55,685.0 92,547.7 79,807.5 1,28,552.2 1,24,976.0
Ancillary revenue % of
10% 12% 12% 14% 24% 19% 17% 20% 23% 15% 13% 14% 11% 11%
total revenues
Source: Company data, I-Sec research

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 InterGlobe Aviation, November 7, 2022 ICICI Securities
Table 5: Estimates of key operating metrics
FY20 FY21 FY22 FY23E FY24E
ASK(mn) 96,260 45,425 70,325 1,11,900 1,28,685
RPK(mn) 82,557 31,519 52,020 91,530 1,10,669
PLF (%) 86 69 74 82 86
Scheduled Passengers (mn) 75 31 50 85 103
RASK 3.71 3.22 3.69 4.72 5.10
CASK 3.74 4.73 4.67 4.68 4.81
Fuel/ASK 1.29 0.84 1.38 2.16 2.16
CASK ex fuel 2.45 3.89 3.29 2.52 2.66
RASK-CASK -0.03 -1.51 -0.98 0.04 0.29
Ancillary Revenue Share(%) 11.27 18.44 17.53 10.90 11.33
Source: Company data, I-Sec research

Price chart
2600

2100
(Rs)

1600

1100

600
May-20

May-21

May-22
Feb-20

Feb-21

Feb-22
Nov-19

Nov-20

Nov-21

Nov-22
Aug-20

Aug-21

Aug-22
Source: Bloomberg

4
 InterGlobe Aviation, November 7, 2022 ICICI Securities

Financial summary
Table 6: Profit and loss statement Table 8: Cashflow statement
(Rs mn, year ending March 31) (Rs mn, year ending March 31)
FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E
Operating Income 1,46,406 2,59,309 5,28,028 6,56,403 Operating Cashflow ex WC (5,214) 13,290 78,056 1,10,573
Operating Expenses 1,46,542 2,53,836 4,45,923 5,27,583 Working Capital Changes (10,928) 7,616 132 (37,711)
EBITDA (136) 5,473 82,105 1,28,820 Capital Commitments 4,369 3,402 2,000 2,000
% margins (0.1) 2.1 15.5 19.6 Free Cashflow (20,510) 17,504 76,189 70,861
EBITDAR 2,669 8,590 85,242 1,32,428 Cashflow from Investing
% margins 1.8 3.3 16.1 20.2 Activities 31,970 15,025 10,182 9,800
Depreciation & Amortization 46,994 50,686 49,074 60,000 Issue of Share Capital 93 277 - -
Gross Interest 21,420 23,580 28,942 32,000 Inc. (Dec) in Borrowings 18,342 13,713 - -
Other Income 10,370 7,256 12,182 11,800 Dividend paid - - - -
Recurring PBT (58,181) (61,537) 16,271 48,620 Cash from financing (17,931) (30,878) (24,893) (26,004)
Add: Extra ordinaries 5,230 (9,408) - - Chg. in Cash & Bank
Less: Taxes (116) 82 - 12,252 balance (2,102) 5,052 63,478 56,657
Less: Minority - - - - Source: Company data, I-Sec research
Adjusted Net Income# (63,294) (52,210) 16,271 36,368
Source: Company data, I-Sec research
#does not include MTM impact. Table 9: Key ratios
(Year ending March 31)
Table 7: Balance sheet FY21 FY22 FY23E FY24E
Per Share Data (in Rs.)
(Rs mn, year ending March 31) EPS(Basic Recurring) (164.4) (135.5) 42.2 94.4
FY21 FY22 FY23E FY24E Diluted Recurring EPS (164.4) (135.5) 42.2 94.4
Assets Recurring Cash EPS (42.3) (4.0) 169.6 250.1
Total Current Assets 2,05,400 2,02,289 2,84,970 3,50,585 Dividend per share (DPS) - - - -
Cash and Current Book Value per share 2.9 (155.4) (113.2) (18.8)
Investments 1,85,671 1,82,266 2,45,744 3,02,400
Total Current Liabilities 81,178 1,02,539 1,16,208 72,411 Growth Ratios (%)
Net Current Assets 1,24,221 99,750 1,68,761 2,78,175 EBITDA nm nm nm 56.9
Deferred tax asset (net) 3,027 2,949 2,949 2,949 EBITDAR (95.6) 221.9 892.3 55.4
Long-term loans and Recurring Net Income nm nm nm 123.5
advances 17,093 20,911 20,911 20,911 Revenue (59.1) 77.1 103.6 24.3
Other non-current assets 14,654 19,386 19,386 19,386
Non-Current Investments 1 0 0 0 Valuation Ratios (x)
Net Fixed Assets with
P/E nm nm 42.6 19.1
CWIP 1,88,884 2,14,090 2,16,811 2,25,699
P/CEPS nm nm 10.6 7.2
Total Assets 3,49,333 3,57,087 4,28,819 5,47,121
P/BV 625.0 nm nm nm
EV / EBITDA nm nm 6.10 3.45
Liabilities EV / EBITDAR nm nm 5.9 3.4
Borrowings 51,347 72,403 72,403 72,403 EV / FCF nm 32.2 6.6 6.3
Deferred Tax Liability - - - -
Lease Liability 2,73,540 3,29,811 3,85,272 4,67,205
Provisions and Incentives 23,337 14,754 14,754 14,754 Operating Ratios (%)
Equity Share Capital 3,849 3,853 3,853 3,853 Fuel/Sales 26.2 37.4 45.8 42.3
Face Value per share Net Rentals/Sales 1.9 1.2 0.6 0.5
(Rs) 10 10 10 10 Other Income / PBT (17.8) (11.8) 74.9 24.3
Reserves & Surplus (2,741) (63,733) (47,462) (11,094) Effective Tax Rate 25.2 25.2 25.2 25.2
Net Worth 1,109 (59,881) (43,609) (7,241) NWC / Total Assets 35.6 27.9 39.4 50.8
Total Liabilities 3,49,333 3,57,087 4,28,819 5,47,121 Inventory Days 7.9 7.9 7.9 7.9
Source: Company data, I-Sec research Receivables (days) 5.5 5.5 5.5 5.5
Payables (days) 38.7 15.0 30.0 10.0
Net D/E Ratio (x) nm nm nm nm

Return/Profitability Ratios
(%) FY21 FY22E FY23E FY24E
Recurring Net Income Margins (43.2) (20.1) 3.1 5.5
RoCE (10.5) (10.6) 10.5 14.7
RoNW nm nm nm nm
Dividend Payout Ratio - - - -
EBITDA Margins (0.1) 2.1 15.5 19.6
Source: Company data, I-Sec research

5
 InterGlobe Aviation, November 7, 2022 ICICI Securities

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