InterGlobe Aviation (INDIGO IN) – Q2FY27 Result Update – ATF inflation and weak demand dents profit – HOLD
Published on 30 Oct 2026
INDIGO IN’s operational performance was broadly in line with our estimates with FX adjusted EBITDAR margin of 15.7% (PLe 15.6%). Fuel CASK increased 68.9% YoY to INR2.44 (PLe INR2.32) due to sharp increase in ATF price. In addition, inflation has seeped into the cost structure with CASK (ex-fuel & ex-forex) rising by 13.7% YoY to INR3.65 amid adverse FX movement and annual contractual escalations. While attempts are made to cover excessive fuel & FX volatility via repricing (yield up 34.3% YoY to INR6.3) it is proving to be insufficient given inflation is quite steep in nature. Further, given weak demand environment, ASKM growth is likely to remain subdued for 2HFY27E. While the near-term operating scenario continues to remain challenging, if yields show signs of stickiness once volatility in fuel & FX stabilizes, the stock could re-rate. We expect 11% ASKM CAGR over FY26-FY29E with FX adjusted EBITDAR margin of 19.1%/25.0%/27.1% in FY27E/FY28E/FY29E and maintain HOLD on the stock with a TP of INR5,177 (8x Sep-28E EBITDAR; earlier 8.5x) as we await signs of yield stickiness to emerge.
