Analysts surprised with IndiGo's Rs 550 cr net profit
Indigo has stated that its net profit has grown five times to Rs 550 in 2009-10
. It cited lower costs and higher revenues but did not disclose further details. "There is a substantial growth in revenues. We also added more aircraft and as a result of this our available seat kilometres measures (ASKMs) have gone up by 28%," Aditya Ghosh, CEO, IndiGo, told ET. IndiGo's revenue increased 35% to Rs 2664.5 crore for the year.Rashesh Shah, analyst, ICICIdirect.com said, "IndiGo's results are a surprise, specially the net profit margin on revenues of Rs 2664.5 crore. This has not been achieved by any carrier so far"
The unlisted airline is one of India's three stand-alone low-fare facilities which is promoted by the Interglobe Group. The company is also in the process of selling shares in an initial public offer (IPO). JM Financial Services is the banker for the same. "The banks are looking at the financing options and it's too early to say anything," said Mr Ghosh. The company's biggest rival in the low-fare space is SpiceJet, which is expected to post a net profit of Rs 200 crore for the year ending March 2011.
SpiceJet made a net profit of Rs 67 crore in FY10. "It is not possible that IndiGo's actual profit is Rs 550 crore. SpiceJet, is slated to make about Rs 200 crore of profit this financial year and IndiGo's ASKMs cannot be drastically different from SpiceJet's as both are low-cost airlines. IndiGo is only 25% bigger than SpiceJet when the size of the fleet is compared. There has to be an element of either sale and lease back or depreciation of costs involved here when the airline is talking about these numbers," said an equity analyst.
"IndiGo has a fleet of 25 aircraft. In a market where currently there are 380 aircraft this comes to about 7-8% of the market share. But it has a passenger market share of 16.4% which means it is using its aircraft optimally leading to profits," he added.
Airline companies are struggling to rebuild investor confidence after some real bad years. For IndiGo, its success lies in the 80% loads across all sectors with average revenue per seat going up by 4.4% in FY10 over FY09. But it is important to also note that operational costs have also gone up by 16% as compared to the previous year (fuel makes up 40% of the total expense)
"At the end of FY09, IndiGo had 19 Airbus A320s in its fleet; by the end of 2010, we had 25 aircraft. We added three new destinations Patna, Dibrugarh and Lucknow to our network. The advantages of scale are getting accrued now," said Mr Ghosh.
By this year end, six aircraft will join the fleet and 14 are slated for next calendar year. The airline, however has funding tied up for this fleet expansion, Mr Ghosh said.
IndiGo is also set to get the nod from the civil aviation ministry to fly international by August 2011. "We will very soon get the in-principle approval to fly international," said Mr Ghosh.
Analysts surprised with IndiGo's Rs 550 cr net profit
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