Oil price, rental costs hit revenue gains of IndiGo: Motilal Oswal

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Published: November 27, 2019 12:52:09 AM

Unhedged forex exposure stood at Rs 9.7 bn, 14% of NW (FY18: Rs 61.7 bn, 87.2% of NW).

forex, indigoForex losses surged to Rs 4.7 bn (FY18: Rs 0.5 bn) on account of 9% rupee depreciation to 70/$.

INDIGO’s FY19 annual report analysis highlighted a first-ever operational loss since IPO. Although revenue increased by a robust 24% to Rs 285.0 bn, Ebitda turned negative to Rs 2.1 bn (FY18: Rs 29.6 bn) due to a rise of 49% in fuel cost to Rs 119.4 bn, 39% in aircraft rental to Rs 49.9 bn and 87.3% in aircraft maintenance cost (net of compensation) to Rs 21.8 bn.

However, OCF was positive at Rs 31.6 bn (FY18: Rs 39.0 bn), supported by deferred incentives of Rs 25.8 bn (FY18: Rs 4.2 bn), supplementary rentals (restricted cash) of Rs 7.7 bn (FY18: Rs 9.7 bn) and other miscellaneous income of Rs 4.0 bn (FY18: Rs 0.8 bn). Forex losses surged to Rs 4.7 bn (FY18: Rs 0.5 bn) on account of 9% rupee depreciation to 70/$. Unhedged forex exposure stood at Rs 9.7 bn, 14% of NW (FY18: Rs 61.7 bn, 87.2% of NW).

However, with application of Ind-AS 116 ‘Leases’, we expect the unhedged gap to widen to Rs 151.7 b, 255.2% of NW, in FY19. Contingent liabilities’ exposure increased 26% to Rs 10.7 bn (15% of NW) on tax demands.

Soaring crude price, rental costs devour revenue gains: Despite strong 24% revenue growth to Rs 284.9 bn, Ebitda turned negative to Rs 2.1 bn (FY18: Rs 29.6 bn) due to a rise of 49% in fuel cost to Rs 119.4 bn, primarily led by a 26% hike in average crude prices, 39% in aircraft rental to `49.9 bn, led by high capacity expansion and 87.3% in aircraft maintenance cost (net of compensation) to Rs 21.8 bn.

Incentives, supplementary rentals, other income aid OCF: Despite operational losses, Indigo reported positive OCF of `31.6 bn (FY18: `39.0 bn), supported by a sizeable increase in deferred incentives to `25.8 bn (FY18: `4.2 bn), supplementary rentals of `7.7 bn (FY18: `9.7 bn) and miscellaneous income of `4.0 bn (FY18: `0.8 bn). Adjusted for supplementary rentals (restricted cash), FCF was down to `6.5 bn (FY18: `16.9 bn).

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