India’s export basket is changing. Electronics, engineering goods, pharmaceuticals and other high-value products are accounting for a growing share of outbound shipments, increasing the need for faster and more reliable logistics.
Yet India’s air cargo ecosystem still depends heavily on passenger airlines. Around four-fifths of the country’s air cargo travels in the belly of passenger aircraft, leaving dedicated freighters with only a small share of the market.
Commercial airlines are primarily designed to transport people, with cargo becoming an additional source of revenue. That model works well for routine shipments but has limitations when customers need dedicated capacity for oversized, high-value or time-sensitive freight.
That is the gap Afcom Holdings is trying to fill.
The company is betting that as India’s exports become more diversified and time-sensitive, a larger share of freight will gradually move through dedicated cargo aircraft rather than relying on spare capacity in passenger flights.
Afcom Holdings Limited 1-Year Share Price Chart
Listed in 2024, the company operates international cargo aircraft across South Asia, Southeast Asia, the Middle East and the Australia-Pacific region, transporting everything from pharmaceuticals and engineering goods to perishables, dangerous goods and oversized freight.
Unlike traditional airlines, Afcom’s business is built entirely around cargo. The company leases aircraft under long-term dry leases but operates them itself using its own pilots, engineers and operational team. That gives it greater control over aircraft deployment, scheduling and utilization while allowing it to respond more quickly to changes in customer demand.
The numbers suggest the strategy is beginning to work. FY26 was the company’s strongest year yet, supported by fleet expansion, higher aircraft utilization and growing charter operations. The bigger challenge now is to sustain that momentum as more aircraft join the fleet.
Why Dedicated Freighters Outperform Passenger Belly Cargo
Most airlines treat cargo as an ancillary business, utilizing spare capacity beneath passenger cabins. Afcom works differently. Its aircraft are configured exclusively to transport freight, allowing the company to schedule flights, deploy aircraft and accept charter assignments based entirely on cargo demand.
That flexibility becomes particularly valuable during supply chain disruptions or when customers require urgent deliveries. Dedicated freighters can also carry shipments that are difficult or impossible to transport on passenger aircraft.
Afcom currently operates international cargo services across South Asia, Southeast Asia and the Middle East. During FY26, it expanded into Dubai while strengthening its Australia-Pacific presence through its partnership with Nauru Air Corporation.
Rather than focusing on passenger load factors, the company measures performance through aircraft utilization, cargo volumes and freight yields. Charter operations complement its scheduled services, providing an additional earnings opportunity whenever demand spikes.
The FY26 Turning Point: Expanding Margins and Triple-Digit Growth
The company’s latest financial performance suggests its business model is beginning to scale.
Revenue more than doubled to Rs 587.7 crore in FY26, up 143.9% over the previous year. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) rose 211.7% to Rs 238.1 crore, while EBITDA margin expanded to 40.5% from 31.7% in FY25. Net profit increased 230% to Rs 121.9 crore, with net profit margin improving to 20.7%.
FY26 at a glance
| Metric | FY26 | YoY change |
| Revenue | ₹587.7 crore | +143.9% |
| EBITDA | ₹238.1 crore | +211.7% |
| EBITDA margin | 40.5% | vs 31.7% |
| Net profit | ₹121.9 crore | +230% |
| Net profit margin | 20.7% | Improved |
| Operating cash flow | ₹36 crore | Turned positive |
Management attributed the strong performance to three factors: higher aircraft utilization, the continued shift towards dry-lease operations and a sharp increase in charter activity during the year.
The March quarter was particularly strong. Revenue increased 87.8% year-on-year to Rs 191.9 crore, while net profit rose 72.9% to Rs 44.7 crore. Part of that performance reflected disruptions to airline operations in the Middle East, which created additional charter demand. Management said the company operated multiple charter flights connecting Chennai, Colombo and Male to move stranded cargo.
Margin Profile
The transition to the dry-lease model also appears to be improving operating efficiency. Management said greater operational control has helped improve aircraft utilization, with peak daily aircraft utilization reaching 11.45 hours a day during FY26. That compares with an Asia-Pacific industry average of 7.9 hours, although it still trails the 10-14 hours achieved by leading global cargo operators.
Higher Aviation Turbine Fuel (ATF) prices remain one of the key risks for the aviation industry. While sustained increases typically pressure airline margins, Afcom believes the impact on its business should be limited. Management said fuel costs are passed on to customers through a fuel surcharge, while any reduction in passenger flights could tighten belly cargo capacity and support freight rates for dedicated cargo operators.
Fleet expansion could define the next phase
FY26 may have been Afcom’s best year yet, but management believes the company is still in the early stages of its expansion.
The immediate focus is on adding more aircraft. After inducting its third Boeing 737 freighter during FY26, funded through a nearly Rs 200 crore Qualified Institutions Placement (QIP), management expects the fourth and fifth aircraft to become operational before the end of the first quarter of FY27.
The bigger step, however, is the planned induction of Boeing 777 wide-body freighters. Unlike the Boeing 737s, these aircraft can carry substantially larger cargo loads over much longer distances, opening routes that are currently beyond Afcom’s reach.
Management expects the first Boeing 777 to become operational during the last quarter of FY27 and eventually plans to build a fleet of nine aircraft – five Boeing 737s and four Boeing 777s – by the second half of calendar year 2027.
If that rollout goes according to plan, it could materially change the company’s earnings profile. Management estimates that a Boeing 777 can generate roughly three times the monthly revenue of a Boeing 737, even using what it described as conservative assumptions. Larger aircraft should also allow Afcom to participate in higher-volume international cargo lanes that are currently inaccessible with its existing fleet.
That could become increasingly relevant as India’s exports expand across sectors such as defence manufacturing, where moving high-value equipment quickly is becoming increasingly important.
The company’s ambitions extend beyond simply adding aircraft. It is expanding its cargo ecosystem through partnerships with Nauru Air Corporation and Noida International Airport, where it expects to become the first dedicated cargo airline operating from the new cargo terminal. Management also expects its Maintenance, Repair and Overhaul (MRO) business to scale up over time, providing an additional source of revenue alongside its core cargo operations.
Rapid expansion has naturally required fresh capital
Fleet expansion has inevitably required additional capital. Afcom, as mentioned earlier, raised nearly Rs 200 crore through a Qualified Institutions Placement (QIP) during FY26, with the proceeds earmarked for inducting more aircraft and supporting the next phase of growth.
The Debt Illusion: Unpacking Lease Liabilities
The expansion has also made the balance sheet appear more leveraged. Borrowings increased during the year as additional leased aircraft were inducted. However, management pointed out that a significant part of the increase reflects lease liabilities recognised under Indian Accounting Standards (Ind AS) 116 rather than conventional bank borrowings. Total lease liabilities rose 41% year-on-year to Rs 338 crore as more aircraft were brought onto the balance sheet.
Debt Profile
While the accounting treatment increases reported depreciation and finance costs, it does not necessarily indicate a deterioration in the underlying business. More importantly, the quality of earnings appears to be improving. Operating cash flow turned positive at around Rs 36 crore during FY26 after remaining negative in the previous year, while working capital days almost halved to 48 from 117, suggesting the business is becoming more cash efficient as it scales.
Can returns stay this high?
Fleet expansion usually comes at the cost of returns, at least initially. More aircraft mean higher capital employed long before they begin contributing meaningfully to revenue.
Afcom, however, has managed to avoid that trade-off so far. Return on Equity (ROE) stood at 26.7% in FY26, while Return on Capital Employed (ROCE) came in at 35.6%. Higher operating margins, better aircraft utilization and improved working capital management have helped the company earn more from every additional aircraft inducted into the fleet.
Return Profile
As we have seen in several high-efficiency manufacturing businesses, improving asset utilization can often be as important as adding capacity.
There could be another tailwind in FY27. After receiving Designated Indian Carrier status, management expects Aviation Turbine Fuel (ATF) costs to decline by around 5% to 7% over the full year. If realised, that should provide some support to margins even if fuel prices remain elevated.
How much of the future is already priced in?
Strong earnings growth has not gone unnoticed by the market.
The stock currently trades at around 34 times trailing earnings. This suggests investors are already factoring in a large part of the company’s near-term expansion. That optimism rests on a fairly straightforward assumption: the company inducts aircraft on time, keeps utilization high and continues growing international cargo volumes.
The market is effectively valuing Afcom on where it could be in a few years rather than where it is today. That leaves less room for operational hiccups along the way.
What could go wrong?
Every growth story has a point where expectations become as important as fundamentals. Afcom may be approaching that stage.
FY26 benefited from unusually strong charter demand after disruptions to airline operations in parts of the Middle East. Management believes those events accelerated an opportunity that already existed. Investors, however, will want to see whether the business can maintain similar utilization levels once charter demand normalises.
The next challenge is fleet expansion itself. Adding aircraft is relatively straightforward. Keeping them profitably occupied is much harder. Delays in aircraft induction, weaker freight demand or lower utilization could all weigh on returns, particularly as fixed costs rise ahead of revenue.
The company also remains linked to the broader health of international trade. While management expects higher ATF costs to be largely recovered through fuel surcharges, sustained weakness in exports or global freight demand would reduce cargo volumes and make it harder to absorb the larger fleet.
The bottom line
Passenger aviation still dominates conversations around India’s listed airline sector. Yet a large share of the country’s air cargo continues to depend on passenger aircraft, leaving dedicated freighter operators with a relatively underpenetrated market to target.
As India’s exports become more diversified and shift towards higher-value goods, dedicated air cargo could gradually become a more important part of the country’s logistics infrastructure. If that happens, businesses focused entirely on freight rather than passengers could become some of the quieter beneficiaries of India’s long-term export story.
Afcom has delivered a strong first year as a listed company, backed by improving margins, healthy returns and an ambitious fleet expansion plan. The next phase, however, will depend on whether it can profitably absorb the additional aircraft it plans to induct over the next two years.
If management delivers on those plans, investors may end up owning more than another aviation stock. They could be participating in one of the less obvious beneficiaries of India’s long-term export growth story.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
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Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
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