IndiGo share price surges 40% in less than 3 months; stock jumps 12% as firm shifts focus from growth to cash

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Published: June 3, 2020 2:38 PM

InterGlobe Aviation-run IndiGo airline share price has surged nearly 40 per cent from its March low of Rs 765.05.

IndiGo share price, Interglobe aviationInterGlobe Aviation share price was trading over 8 per cent higher at Rs 1,022.45 apiece on BSE in Wednesday’s strong trade

InterGlobe Aviation share price soared 12.52 per cent to hit day’s high of Rs 1,064.95 on Wednesday, a day after the company announced its March quarter results beating the Street expectations. Despite an Rs 870 crore net loss in the March quarter as coronavirus induced lockdown forced closure of flight operations which impacted its financials, revenues from operations during the period under review increased 5.3 per cent on-year to Rs 8,299 crore. InterGlobe Aviation-run IndiGo airline share price has surged nearly 40 per cent from its March low of Rs 765.05. However, the stock price is still 80 per cent off from its 52-week high of Rs 1,911. “The company has cash of INR203.8b (INR89.3b in free cash and INR114.5b in restricted cash). However, flying with lower PLFs (passenger load factor) would result in an influx in variable cost and consequently in further cash erosion,” Motilal Oswal said in its latest research report. “We continue to believe that long-term demand and stability in the sector remain a key challenge; thus, we remain cautious on the stock,” it added.

IndiGo’s CEO Ronojoy Dutta said that till the end of February, the airline was profitable, but as it entered March, unit revenues started falling, resulting in an operating loss. “In times like these, we should shift our focus from profitability and growth to liquidity and cash. We ended the quarter with a cash balance of Rs 20,400 crore, of which Rs 8,900 crore is free cash,” Dutta said. The company aims to conserve cash and shore up liquidity.

InterGlobe Aviation share price was trading over 8 per cent higher at Rs 1,022.45 apiece on BSE in Wednesday’s strong trade in comparison to a 1.62 rise in S&P BSE Sensex. The stock opened at Rs 950.60 and hit the day’s low of Rs 949.85. Research and brokerage firm JM financial has given a ‘sell’ rating to the stock, with a downside of over 20 per cent as against Tuesday’s close of Rs 945.55. “Crippling restrictions on air travel imposed by Center/State – different quarantine norms for different states and the overall health risk posed by travel, in general, is likely to keep demand (flyers), abysmally low over the medium term,” JM Financial said in its recent report. It further said that the cost and liquidity initiatives will help the company tide over a challenging year at the cost of a sharp reduction in the size of operations and a significant dent on the balance sheet. “Significant movement in USD/INR and the crude price remains a key monitorable,” it added.

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