InterGlobe Aviation, parent company of low-cost carrier IndiGo, slumped over 11 per cent on Tuesday after it reported 7 per cent year-on-year fall in its net profit at Rs 592 crore for the quarter ended June 30, 2016, citing competitive pressures and and slow induction of A320 neos. The company had posted net profit of Rs 638.89 crore in the same quarter last year. Analysts have warned that the company’s profitability may be impacted as competition remains tough. According to Reuters, Ambit Capital while reiterating ‘Sell’rating has cut the company’s earnings forecasts, saying “sustained double-digit passenger growth should come at cost of margins” .
At 10.19 am, the scrip was trading 5.80 per cent down at Rs 917.50. The scrip has opened at Rs 930 and has touched a high and low of Rs 947.25 and Rs 906.00, respectively, in trade so far. Later, the scrip settled the day 11.17 per cent down at Rs 865.20.
Brokerage house Motilal Oswal has downgraded Indigo stocks to ‘Neutral’ with the target price of Rs 1,057 and said that the first quarterly numbers having been disappointing on account of competitive pressure and fleet guidance. It said,” We cut our FY17/FY18 earnings per share (EPS) by around 7 per cent primarily led by around 2 per cent cut in our yield assumptions as we believe that Indigo’s new stance to respond actively to competitor’s pricing could result in sacrificing profitability in the near term.”
Gross sales of the aviation company jumped by 8.51 per cent year-on-year to Rs 4545.19 crore during the quarter under review against Rs 4188.88 crore in the same quarter last year. However, operating profit dropped 12.32 per cent year-on-year to Rs 977.83 crore.
IndiGo President Aditya Ghosh said,”Profitability was lower than last year primarily because of competitive fare pressures. We have reduced our debt by Rs 458.9 crore during the quarter.”