Does a short-term operational setback change the investment case for IndiGo? The budget-carrier in early December faced significant disruption, leading to cancellations, regulatory scrutiny, and a cut in guidance.
The brokerage house Motilal Oswal has maintained a Buy rating on InterGlobe Aviation, the parent company of IndiGo, with a target price of Rs 6,300. This implies an upside of about 22% from current levels. The brokerage believes the recent disruption needs to be viewed in the context of a much larger, multi-year aviation growth cycle.
According to the brokerage report, short-term challenges have dented near-term numbers, but the broader aviation opportunity for India and IndiGo’s position within it remains intact.
Let’s take a look at the brokerage say on this stock and the rationale behind it –
India’s aviation story is still taking off
According to the brokerage report, “India is emerging as a key beneficiary of global aviation growth”. This is supported by rising long-haul travel, better international connectivity, and strong outbound tourism.
The brokerage house in its report noted that international passenger traffic for Indian airlines has been growing faster than overall traffic. The report also outlined a comparison with China, noting that income growth and tourism spending tend to move together.
As per the brokerage, India is now at a stage where rising incomes could translate into a sustained increase in travel demand over the coming years.
Motilal Oswal on IndiGo’s international push
Motilal Oswal pointed out that IndiGo has been preparing for this shift well in advance. According to the brokerage report, “InterGlobe Aviation has been proactively positioning itself to capture this opportunity.” The airline has steadily increased its international presence, with overseas passengers now forming a much larger share of its total traffic compared to a few years ago.
IndiGo has doubled the number of international destinations and increased its winter schedule. The brokerage noted that this strategy is further supported by wide-body aircraft orders, temporary leased aircraft for long-haul routes, and the planned development of a maintenance, repair and overhaul facility in Bengaluru, which is expected to reduce costs over time.
Motilal Oswal on IndiGo: December disruption puts near-term pressure
Despite this long-term setup, December turned out to be a difficult month. As per the brokerage report, “the airline’s aggressive winter schedule misaligned with the new Flight Duty Time Limitation norms.”
The situation escalated in early December, resulting in cancellations, refunds, regulatory intervention, and fare caps. While operations stabilised later in the month, the damage to near-term performance was already done. According to Motilal Oswal, “the disruption…is expected to reduce third quarter financial year 2026 revenue by 10–12%.”
Motilal Oswal on IndiGo: Estimates cut, but not drastically
Motilal Oswal has revised its numbers to reflect the impact of the disruption and higher fuel costs. The brokerage report noted, “we have reduced our Revenue/EBITDAR/PAT estimates by only 2%/6%/18%, as we had already incorporated lower available seat kilometer (ASK) and revenue passenger kilometer (RPK), along with higher cost per available seat kilometer (CASK) post our 2QFY26 results. We have also reduced our FY27/FY28 PAT estimates by 15%/11%, considering the higher employee costs stemming from the new FDTL rules and increasing fuel costs.”
Motilal Oswal on IndiGo: Why the long-term view remains unchanged
According to the brokerage report, “we believe IndiGo’s long-term structural thesis remains intact.” IndiGo continues to command over 60% market share, giving it scale advantages that are hard for competitors to replicate.
Motilal Oswal also believes that expanding international operations can help offset currency risks over time, as overseas revenues provide a natural hedge against a weaker rupee. The upcoming in-house maintenance facility is expected to further support margins in the medium term.
Valuation supports the upside view
Motilal Oswal values IndiGo based on EBITDA and has rolled its target forward to financial year 2028. According to the brokerage report, “we reiterate Buy with a target price of Rs 6,300.”