Many top experts and investors alike avoid airline stocks in India, as the space is saddled with high fixed costs, and commodity prices remain unpredictable. However, legendary investor Rakesh Jhunjhunwala holds aviation stocks in his portfolio. In an interview to ET Now, Sanjeev Prasad of Kotak Institutional Equities shared his top pick from the space. In an interview to ET Now, Sanjeev Prasad Co-Head and Managing Director, Kotak Institutional Equities said, “ Indigo is a good stock to own. It’s a play on the entire consumer discretionary space.” Interestingly, Rakesh Jhunjhunwala had reportedly placed a large bid on IndiGo IPO in the HNI category in 2015.
Track live stock price: Interglobe Aviation
However, the September-17 shareholding data does not show his name among public shareholders holding more than 1% stake in the company. In fact, despite record Q1 profits posted by the company the ace-investor had grilled IndiGo’s top brass in the investor conference in August this year. Ace investor Rakesh Jhunjhunwala had quizzed Interglobe Aviation’s top management on the rationale for growth guidance. Notably, the company had posted highest ever quarterly net profit by any airline in India of Rs 811 crore in April-June quarter.
Sanjeev Prasad explained that the industry structure is well concentrated in the sector, and he also sees profitability returning to the sector. “The industry structure is pretty nicely concentrated, between the top four players. IndiGo is at 40%, other three are at 13-17% each. You have 85% market share concentrated among the four players. Jet and Air India, the third and fourth are keen on improving their balance sheets, which is a great thing.The profitability of the sector must look up going forward, right now it appears to be fine,” he told the channel.
Interglobe Aviation shares were trading at Rs 1,181, up by more than 0.85% on Tuesday morning. The shares have returned more than 42% in the year so far. In comparison, the BSE Sensex is up by 25% in the same period. For the latest quarter, IndiGo reported a 294% increase in net profit to Rs 551.55 crore, as compared to Rs 139.85 crore in the same period a year ago, helped by credits received from manufacturers for aircraft delivery delays and grounding, besides better revenue management. Currently, IndiGo has about 38% of the domestic aviation market with about 141 planes and 913 daily flights.