IndiGo was among the key index losers on Monday, slipping nearly 2 per cent in trade. IndiGo, India’s largest airline, is facing turbulence in the stock market despite a strong run over the past year. Nuvama Research, in its latest report, raised concerns about high valuations and signs of slowing demand. The brokerage has kept its rating at ‘Hold’ with a target price lower than the current market level.The Nuvama’s target price of Rs 5,428 implies 3-5% downside for the IndiGo share price.
Nuvama Research pointed to a weak second quarter for InterGlobe Aviation, operator of IndiGo. Domestic scheduled flights in Q2 are estimated to have declined 3% year on year. For IndiGo, the drop is sharper at about 4%. Total scheduled flights for the industry are up only 1%, and IndiGo’s count is flat. The limited growth is supported mainly by international routes, where IndiGo’s flights are up 30% and industry flights up 20%.
In the April–July period of FY26, domestic passenger growth was only 2.5% compared with the same period last year. IndiGo did better, growing 8.2%, but this is still well below the pace seen in FY25. International passenger growth was 10.2% in the same four months, slower than the 13.5% expansion achieved in FY25.
Yields slipping across routes
Average domestic fares are under pressure. Nuvama’s airfare tracker shows passenger revenue per seat kilometre at about Rs 4.25/km in Q2, down 12% quarter on quarter. International revenue per seat kilometre is around Rs 5.6/km, down 5% sequentially. Lower fares indicate that supply is running ahead of demand, leaving thinner margins for airlines.
Fuel costs Vs rupee depreciation
Domestic aviation turbine fuel prices are down about 5% year on year to Rs 90.9 per litre. The fall in regional ATF prices was sharper at 11%. However, the rupee weakened about 3% in the same period, offsetting much of the benefit of cheaper fuel. Since fuel makes up 30–40% of airline operating costs, the limited relief keeps pressure on profitability.
IndiGo’s rising competition on international routes
SpiceJet and Akasa are adding more direct international flights in Asia. This expansion is taking away premium fares on overseas routes. With geopolitics and tariff uncertainty also weighing on travel demand, the competition is expected to intensify further, challenging IndiGo’s ability to defend yields.
Outlook for Indigo Airlines’ financial performance
Nuvama’s projections show revenue rising to Rs 836,201 million (Rs 83,62,010 lakh) in FY26 and further to Rs 923,525 million (Rs 92,35,250 lakh) in FY27. The EBITDA is also set to see significant uptick.
Diluted earnings per share is estimated to be Rs 229.3 in FY26 and Rs 325.7 in FY27. Despite these gains, the stock is valued at about 25 times FY26 earnings and 17.6 times FY27 earnings.
Indigo share price target and trend
IndiGo’s stock has moved from around Rs 3,825 in September 2024 to a peak of over Rs 6,175 by mid-2025 before easing to Rs 5,596 by late September 2025. The rally has been strong, but valuations have become demanding, as per Nuvama.
The brokerage advises a ‘HOLD’ because while IndiGo’s current market price of Rs 5,596 is higher than its target price of Rs 5,428, the expected downside of about 3-5% is not large enough to justify a sell call. In their view, the stock looks expensive in the near term and demand pressures are visible, but IndiGo’s fundamentals remain strong, with a dominant scale, growing international routes, and a solid balance sheet. Lower crude oil prices and delays in new aircraft deliveries across the industry could also support fares and margins. That is why the recommendation is to stay put, not to buy more at these levels, but not to exit in haste either.
Indigo Airlines’ peer comparison
IndiGo’s stock is trading at a much higher valuation than both Indian and global peers. The brokerage firm used EV/EBITDAR (a measure of company value versus operating earnings before rent and other costs) to compare airlines.
- IndiGo: valued at 9.9 times FY26 earnings
- SpiceJet (India): only 4.4 times FY26
- US airlines (like Delta, American, Southwest): average about 7.1 times
- European carriers (Ryanair, Lufthansa): even lower at 4.7 times
- Asia-Pacific airlines (Singapore Airlines, Air China, Cathay, Japan Airlines): around 6.2 times
- Global average: close to 6.3 times
To put it simply, IndiGo is priced about 50–60 per cent above the global average and more than double SpiceJet, its Indian competitor. The company’s scale and profits justify some premium, but with passenger demand slowing and fares weakening, the high valuation looks stretched.
Nuvama kept its estimates unchanged and maintains the stance at ‘HOLD’. The near-term outlook remains challenging due to weak domestic demand, falling yields, and higher competition. While lower crude prices and a stronger international mix could support earnings, the current valuation leaves little room for upside.