Internal Assessment -2

PROJECT
ON
FINANCIAL STATEMENT ANALYSIS OF INDIGO & AIR ASIA LTD

SUBMITTED By: -

MD MATIUR RAHMAN (23GSOB2011042)

MD ABID ALI (23GSOB2011043)
MD AZHARUDDIN (23GSOB2011196)
MOHIT KUMAR (23GSOB2010581)
NAINA MISHRA (23GSOB2010711)

(GROUP-8)

Section-10

1st Semester (2023-2025)

MBA IN DUAL SPECIALIZATION

SCHOOL OF BUSINESS

UNDER SUPERVISION OF
PROF. DR. SARIT BISWAS

SCHOOL OF BUSINESS, GALGOTIAS UNIVERSITY,

GAUTAM BUDDH NAGAR, GREATER NOIDA,
UTTAR PRADESH, INDIA
JAN-2024
 CONTENT

ABSTRACTS & INTRODUCTION 1

OBJECTIVES& LITERATURE REVIEW 2
RESEARCH METHODOLOGY 3
QUICK RATIO 4
NET PROFIT RATIO 5
6
RETURN ON ASSET &
OPERATING PROFIT RATIO
DEBT TO EQUITY RATIO 7
ASSET TURNOVER RATIO 8
RETURN ON CAPITAL EMPLOYED 9
& MAJOR FINDINGS
SUGGESTIONS & CONCLUSION 10
SWOT ANALYSIS 11
BIBLIOGRAPHY 15
 FINANCIAL STATEMENT ANALYSIS OF
INDIGO AND AIR ASIA LTD

ABSTRACT
Financial performance is a term used to describe a company's long-term
financial health. Information on financial statements is of high importance for
decision- making based on analysis and interpretation of financial statements.
Even a well- established company may require additional funding to improve or
expand its operations. Ratio analysis is widely used as an efficient means of
analysing financial statements. Secondary data is gathered from the companies'
annual reports. The current study examines Indigo and Air Asia ltd.’s financial
strengths and weaknesses. The data was collected over a five-year period, from
2015 to 2019, and then compiled into tables and analysed using Ratio analysis.
The study reveals that both companies' financial analyses are satisfactory.
Keywords: Financial performance, Ratio analysis, Indigo, Air Asia

INTRODUCTION:

Financial statement analysis entails examining a company's financial statements

to get a sense of its financial situation. The profit-and-loss statement, balance
sheet, and cash flow statement are the 3 key monetary statements you will use.
Financial analysis determines a company's economic stability, as well as
providing insight into how it operates. However, it's necessary to keep in mind
that financial statement review has its own set of limitations. Financial
performance identifies however effectively an organization produces financial
gain and maintains its assets, liabilities and also the monetary interests of its
stakeholders.

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Ratio analysis is the most common and pragmatic structure used in financial
analysis to help decision makers. There are few categories over the same area of
the financial institution under the financial ratio analysis process. It is also used
to determine different aspects of the company's operational and financial
success, such as its productivity, liquidity, profitability and solvency. Financial
statement numbers must be placed into perspective so that investors can better
appreciate multiple aspects of the company's activities. Ratio analysis is one
approach that an investor may use to obtain that understanding.

During the last 3 years, India's civil aviation business has been one in all the
country's quickest growing industries. India has gained the Upper Hand as the
world's third-largest domestic aviation industry. Aviation is an important part of
the nation's transportation market, and it contributes significantly to economic
development. By 2024, aviation could be a big growth driver in India's quest to
become a $5 trillion economy. So, based on the available data, we can conclude
that India's aviation industry is evolving on a daily basis. In this case, the aim is
to examine the financial results of the chosen aviation business. The present
study is to analyse the evaluation of financial performance of Indigo and Air
Asia ltd.

OBJECTIVES:

 To assess the financial strength and weaknesses of Indigo ltd and Air
Asia ltd
 To know the profitability, liquidity position, and financial soundness of
the company
 To analyse the balance sheet and income statement
 To assess the company's financial viability.

LIMITATIONS OF THE STUDY:

 The analysis depends on the secondary information obtained, i.e.

differing kinds of Indigo and Air Asia ltd reports.

LITERATURE REVIEW:

Shreeda Shah and Dr. Viral Shah (2018) analyzed the financial performance of
Visa steel Ltd. The study examines the financial performance of Visa steel Ltd.
Ratio Analysis has been used in the study and the study compared from 2012-13 to
2016-

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17. This study denotes that the financial performance of the company has been poor
after 2015-16 and directors should pay more attention to revive the company.

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Ms. C. Shiva Priya (2019) entitled a comprehensive study financial performance of
Asian Paints Ltd in India. This study examines the financial performance of Asian
Paints Ltd. This study explains that ratio analysis will help the management in
estimate the future performance of the company. The Study compared from 2014-
2018 financial performance of the company.

Dr. Biswanath Sukul (2016) entitled a comparative study on Tata Steel Ltd. and
Sail Steel Ltd. The study covers one public sector steel company and one private
sector. The study has been undertaken for a period of five years from 2010-11 to
2014-15. The study measures liquidity, solvency, profitability and overall
management efficiency of both the companies. It will be helpful for the
prospective investors to take decision regarding investment.

Idhayajothi, R (2014) the main idea behind this study is to analyze the financial
performance of Elgi Equipment’s Limited. The result shows that financial
performance is sound and also suggested to improve financial performance by
reducing the various expenses.

RESEARCH METHODOLOGY

The current study is analytic in nature. Two companies (Indigo Ltd and Air Asia
Ltd) from the Indian aviation industry were chosen. The study is aimed on
secondary data gathered from the company's annual reports, journals, articles,
and other open-source databases.

DATA ANALYSIS & INTERPRETATION:

CURRENT RATIO:
TABLE 1
Year/Company Indigo Air Asia
2015 1.07 0.53
2016 1.52 0.97
2017 1.97 0.81
2018 2.39 1.29
2019 2.26 0.74

4
 Current Ratio
3
2.5
2
1.5
1
0.5
0

2015 2016 2017 2018 2019

IndigoAir asia

From the above table and graph, it's clear that indigo has 1.07 times current ratio
within the year 2015. It became 1.52 times within the year 2016 & 1.97 times
within the year 2017 but in the year of the study i.e. in 2019, this ratio of indigo
is 2.26. On the opposite hand, current ratio of Air Asia is 0.53 times in 2015 and
0.74 times in 2019. From the above, it will be complete that the financial
position of Indigo is better than Air Asia in terms of current ratio as a result of
Indigo has a lot of variations in current ratio as compare to Air Asia.

QUICK RATIO:
TABLE 2
Year/Company Indigo Air Asia
2015 1.03 0.74
2016 1.50 0.96
2017 1.94 0.68
2018 2.36 1.18
2019 2.24 0.60

Quick Ratio

2.5
2
1.5
1
0.5
0

2015 2016 2017 2018 2019

IndigoAir Asia

5
It is clear from the above table and graph that Indigo had a 1.03 times quick
ratio in 2015. It increased to 1.94 in 2017 and will continue to increase until
2018. Air Asia, on the other hand, had 0.74 times in 2015 and 1.18 times in
2017. Indigo and Air Asia both experience a one-year decline during the study
period, dropping to 2.24 times and 0.60 times respectively in 2019.From the
above it can be concluded that the financial position of Indigo is better than the
Air Asia.

NET PROFIT RATIO:

Table 3 (%)
Year/Company Indigo Air Asia
2015 9.36 8.25
2016 12.3 23.64
2017 8.92 16.17
2018 9.74 15.93
2019 0.54 -2.38

Net Profit
25
20
15
10
5
0
-520152016201720182019
IndigoAir Asia

The above chart illustrates that Indigo's net profit was 9.36% in 2015 and 0.54%
in 2019, which is very low However, Air Asia had 8.25% in 2015, increased to
23.64% in 2016, and then began to decline in the following years, with 16.17%
and 15.93% in 2017 and 2018. The net profit of Air Asia was negative in the
last year of the report. It demonstrates that Air Asia outperforms Indigo in terms
of financial results.

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RETURN ON ASSET:
Table 4 (%)
Year/Company Indigo Air Asia
2015 12.11 2.5
2016 15.73 7.4
2017 10.90 7.3
2018 10.61 9.1
2019 0.62 -1.1

ROA
20

15

10

0 2015 2016 2017 2018 2019

-5

IndigoAir Asia

According to the table and graph above, indigo had a ROA of 12.11% in 2015
and 15.73% in 2016. It indicates a downward trend in the following years. Air
Asia, on the other hand, had a 2.5% ROA in 2016 and improved profitability
year after year until 2018. But in 2019, profits fell considerably and assets were
not sufficiently productive to produce income.

OPERATING PROFIT RATIO:

Table 5 (%)
Year/Company Indigo Air Asia
2015 16.51 25.3
2016 22.80 30.2
2017 16.19 22.3
2018 17.27 11.5
2019 4.12 6.10

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 Operating profit
35
30
25
20
15
10
5
0

2015 2016 2017 2018 2019

IndigoAir Asia

The table & graph above shows that indigo has an operating profit of 16.51 per
cent in 2015. This figure was 22.80% in 2016 but the operating share of Indigo
in the last year of the study is 4.12% in 2019. On the other hand, Air Asia's
operating ratio is 25.3% for 2015 and 30.2% for 2016. The above concludes
that, in terms of operating ratios, Air Asia's financial position is better than
Indigo, since the operating ratio of indigo, in comparison with Air Asia, is
small. Air Asia is therefore generating more returns from its sales.

DEBT TO EQUITY RATIO:

TABLE 6
Year/Company Indigo Air Asia
2015 8.78 2.83
2016 1.10 1.60
2017 0.63 1.16
2018 0.32 0.16
2019 0.32 2.87

Debt to Equity
10
8
6
4
2
0

2015 2016 2017 2018 2019

IndigoAir Asia

8
As shown in the table and graph above, when Indigo reduced its debt-to-equity
ratio from 8.78 in 2015 to 0.32 in2019, Air Asia increased its debt-to-equity
ratio from 2.83 in 2015 to 2.87 in 2019. As a result, Air Asia relies on debt
rather than equity to fund its operations. Indigo is using more equity than debt
on the other side.
ASSET TURNOVER RATIO:
TABLE 7
Year/Company Indigo Air Asia
2015 2.75 0.30
2016 2.93 0.32
2017 3.71 0.44
2018 4.38 0.53
2019 4.25 0.54

Asset turnover
5
4
3
2
1
0

2015 2016 2017 2018 2019

IndigoAir Asia

The table and diagram above shows that the ratio in 2015 is 2.75 and that in the
coming years the ratio in 2017 is 3.71 and in 2018 the ratio is 4.38, but in 2019
the proportion decreases slightly to 4.25. However, Air Asia's turnover ratio was
0.30 in 2015 and 0.54 in 2019. It suggests that Air Asia needs to figure out how
to extract more sales revenue from its assets.

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RETURN ON CAPITAL EMPLOYED:
Table 8 (%)
Year/Company Indigo Air Asia
2015 16.67 10.9
2016 22.22 13.4
2017 15.91 17.0
2018 14.94 30.0
2019 2.11 34.0

ROCE
40

30

20

10

0
2015 2016 2017 2018 2019

IndigoAir Asia

According to the table and graph above, Indigo earned 16.67 % in 2015, while
Air Asia earned 10.9 %. Indigo's return on capital employed is declining, with
the exception of 2016, when it is 22.22 percent. On the other hand, in this study,
Air Asia has an increasing trend of 10.16 in 2015 to 34.0 in 2019. Indigo's
overall performance is clearly inferior to Air Asia, as seen in the table.
MAJOR FINDINGS:

 The examination of ratio analysis is unquestionably useful for forecasting

the company's future progress.
 Indigo's current ratio is always greater than one. It means that the
company's current assets are sufficient to repay short-term liabilities.
However, Air Asia lacks sufficient liquid assets to cover its short-term
liabilities.
 Indigo's quick ratio is also greater than one, indicating that the company
has more quick assets than current liabilities. Air Asia, on the other hand,
will not be able to pay off its existing liabilities in full in the near future.
 Instead of having a better net profit ratio than Indigo, Air Asia incurred
loss in that study last year. A high net profit ratio suggests that the
organisation has been effective in making profit from its operations.

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  Indigo's return to asset ratio shows that it has a lot of trouble turning a
profit in the year 2019. However, Air Asia is a rapidly expanding
company with ample resources. In the final year of the study, Air Asia
also failed to generate revenue growth.
 Air Asia has a higher operating ratio than Indigo, indicating that the
company can generate profit from its core operations.
 Indigo's debt to equity ratio has decreased over the year, indicating that
the company is relying less on debt from lenders and more on equity from
shareholders. However, Air Asia's ratio is higher, implying that the
company can easily service its debt obligations.
 The asset turnover ratio demonstrates that indigo was able to sell more of
its total assets. However, Air Asia is failing to make the best use of its
assets in order to generate sales.
 Air Asia's return on capital employed ratios are higher than Indigo's,
indicating that the company's ROCE has been increasing over time.
SUGGESTIONS:

 Air Asia's liquidity position is inadequate, so it must take the necessary

steps to increase its current assets or pay off its liabilities.
 ROA of Air Asia is small in terms of indigo, which means it must focus
on increasing its net income and improving fixed asset efficiency.
 Indigo's net profit margin is average, so they should improve it by
increasing revenues, such as by selling more products or services or by
raising prices.
 Indigo's business profit ratio is low and must therefore focus on how its
core businesses generate more income.
 Indigo's debt to equity ratio is average, so it can be improved by rising
external equities such as creditors.
 By increasing revenue, Air Asia needs to increase its ROCE as it falls
short of the standard value.

CONCLUSION:

 Efficient financial management is critical to the growth of a business. On

the whole, financial output is very active. The discussion of financial
results has shifted at a rapid pace. Accounting ratios assess and report on
an organization's overall performance. The Indian aviation industry is
both

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 an important part of the Indian economy and one of the fastest growing
in the world. The current study was carried out to assess the financial
performance of Indigo and Air Asia Ltd. According to the study's
findings, the financial performance of both companies was satisfactory.
Air Asia has been determined to be more profitable, while Indigo has a
stronger liquidity position.

SWOT ANALYSIS OF INDIGO & AIR ASIA:

From the SWOT analysis of IndiGo Airlines, let us first begin by

understanding the strengths of IndiGo Airlines.
Strengths of IndiGo Airlines
Strengths indicate what a company excels at and what sets it apart from
the competition and how it’s unique in the market. Let’s see what are the

strengths of IndiGo Airlines:

Positive Image: IndiGo Airlines works effectively providing high-quality

service with low travelling costs. People choose IndiGo Airlines for the
service, cost and constant offers provided by IndiGo Airlines.

Services:

It provides various services that make it easier for customers like: online
booking, 24 hours customer support, online flight status checking.
High Stakeholders Engagement: IndiGo Airlines has a high employee
satisfaction rate and it is very transparent to its customers and provides
accurate information. They communicate often with their customers and
work on customer feedback and the satisfaction of customers.
Corporate Social Responsibility: IndiGo Airlines not just focuses on
business but also participates in social activities through IndiGo Airlines
reach, which will benefit the society and the rural areas in upliftment,
child education, women empowerment and environmental activities.
Fleet Strategy: The airline has ensured to purchase its fleet at prices
much lower than the actual price that the seller would sell for. This has
helped IndiGo Airlines maintain its low costs consistently.

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Weaknesses of IndiGo Airlines:

Sustaining Profits: IndiGo Airlines has been termed as a low-cost carrier,

as a result, it has to lower the cost of travelling. Due to this reason
IndiGo Airlines was unable to generate and sustain profits consistently.
Over-dependence on Volume: In order to sustain the profits of the
company, they should ensure that volumes are high and the business
cannot be affected by fluctuations of the demand. The company has to
invest more and take measures to manage even during unexpected
situations like pandemics, where business goes low. Also must focus on
reserves.

The Grounding of Aircraft:

When the incident of the safety of Pratt and Whitney aircraft became
questionable, the Civil Aviation Authority, had to decide to ground these
aeroplanes brought by IndiGo Airlines. This scandal has affected
business operations and goodwill.

Opportunities for IndiGo Airlines:

Growing Demand for Foreign Travel: In today’s generation we have

seen people travelling to various foreign countries either for business,
education or for holiday. So the demand for foreign travel is huge.
Globalization: Since there is demand for travel to foreign countries.
IndiGo Airlines has a growing opportunity and it increases the network
as there is international travel.
Increase the Demand: The business can make use of the chance by
establishing various interactive digital platforms for marketing IndiGo
Airlines business and gaining maximum customers.
Online advertising activities of IndiGo Airlines are accomplished by
highly skilled professionals who are creative and well versed with digital
marketing skills and techniques. These skills are made for smart people
like you who can establish a career in digital marketing and find the right
job opportunity that will suit your needs.

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Increasing Partnership:

Partnerships with international players and trying to reach newer &

unexplored destinations have helped IndiGo Airlines to expand its reach
worldwide.

Increase in Domestic Tourism:

Since IndiGo Airlines has a low cost for travelling, the middle class and
lower middle class will also access the airways which increase the
demand.
Threats to IndiGo Airlines:

High Competition: IndiGo Airlines have a series of competition in

domestic and worldwide competitors who alter according to the
customer’s choice and preferences. This might affect the business of
IndiGo Airlines.

Costing:

The main expense of the aeroplane is the cost of fuel. The prices keep
fluctuating every day, and IndiGo Airlines charges low prices for
travelling, managing these expenses is a serious threat.
Pandemic Situations: The aviation industry has seen a dramatic drop in
demand for air transport from passengers due to the COVID-19
pandemic. Many people’s jobs in the air transport sector were at stake
during a pandemic.

Terrorist Attack:

The threat posed by terror groups hangs over all airlines as well as
aeroplane manufacturers.

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Government Regulations:

Emission regulations and many other government rules directly or

indirectly affect the airline company.

Air Asia is one of the leading brands in the airlines sector. Air Asia
SWOT analysis evaluates the brand by its strengths & weaknesses which
are the internal factors along with opportunities & threats which are the
external factors. Let us start the SWOT Analysis of Air Asia:

Quick Glance:

Strengths
Weaknesses
Opportunities
Threats
Air Asia Strengths

Strong Promoter
Well established LCC operating out of South East Asia
It has operations in over 25 countries and over 400 international and
national destinations
It has subsidiaries in Indonesia, Thai, Phillipines, Japan
It has a fleet size of nearly 300 aircrafts
Above are the strengths in the SWOT Analysis of Air Asia. The
strengths of Air Asia looks at the key internal factors of its business
which gives it competitive advantage in the market and strengthens its
position.

Air Asia Weaknesses:

Not on too many routes as compared to market leaders

Stiff competition in its sector
These were the weaknesses in the Air Asia SWOT Analysis. The
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weaknesses of a brand are certain aspects of its business which it can
improve.

Air Asia Opportunities:

The increasing traffic from India and Indians prefer budget airlines as
they are cost conscious
Has Positioned itself as the major LCC in SE Asia
Above we covered the opportunities in Air Asia SWOT Analysis. The
opportunities for any brand can include prospects of future growth.
Air Asia Threats:
Rising Fuel Costs
Rising Labour Costs
Rise of Other LCCs in Market
The threats in the SWOT Analysis of Air Asia are as mentioned above.
The threats for any business can be external factors which can negatively
impact its business.

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(2020).P. 325
to 328
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(2018)"P. 59 to 61
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[12]. www.gurufocus.com

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