Subscribe Interglobe Aviation Limited: AnandRathi Research

IndiGo is India's largest passenger airline with a 33.9% and 37.4% market share of domestic passenger volume for fiscal 2015 and the five months ended August 31, 2015, respectively, according to the DGCA report.

The Company operates on a low-cost carrier (LCC) business model and focuses primarily on the domestic Indian air travel market. Indigo is the seventh largest low-cost carrier globally in terms of seat capacity in fiscal 2015, according to CAPA report. Company is continuously focusing on maintaining their cost advantage and a high frequency of flights while striving to fulfill their simple brand message of providing "low fares, on-time flights and a hassle-free experience" to their passengers.

Currently company has an order book of 430 A320neo aircraft and expects to take delivery of 14 additional aircraft, including nine A320neos, by March 31, 2016. As of August 31, 2015, the average age of aircraft was 3.7 years. As of March 31, 2015, the average age of aircraft was 3.2 years, which, according to CAPA, was the second youngest average fleet age among Indian carriers and one of the youngest fleets of any LCC globally.

As of the week ended August 31, 2015 the company operated scheduled services to 33 airports in India, with a maximum of 603 domestic flights per day. The company operated an average of 570 domestic flights per day, for the month ending March 31, 2015.

From fiscal 2011 to fiscal 2015, domestic passenger volume increased at a CAGR of 25.8% from 9.5 million domestic passengers in fiscal 2011 to 23.7 million domestic passengers in fiscal 2015 and 12.6 million domestic passengers as of August 31, 2015, according to the DGCA. The market share of the company, of domestic passenger volume increased from 17.6% in fiscal 2011 to 33.9% in fiscal 2015, according to the DGCA.

Interglobe has received industry accolades in recognition of the quality of their airline service, including the award for "Best Low-Cost Airline in Central Asia & India" at the SkyTrax World Airline Awards for six consecutive years from 2010 to 2015. The company was ranked among the "Best Companies to Work For" in India in 2015 for the eighth consecutive year by a study done by the Great Places to Work Institute in partnership with The Economic Times.

Recommendations

Indigo is India's largest airline by Available seat Km. (ASK) and passenger volumes, third largest by fleet and largest in terms of fleet order book. Moreover, it is also India's only profitable airline and has been like that for the past five years, in an industry plagued with high costs and taxes. In light of Indigo's market leadership position, cost competitiveness, and a low-cost carrier (LCC) business model along India's aviation potential makes Indigo one of the consistent performer & growing potential in this industry. On valuation front company is trading at 6.8xs EV/EBITDA and 1.6xs EV/Sales for FY16. Also on annualized basis Earning for FY16 comes around 10xs which is reasonable. Thus, this offer is worth considering for investment on a short and medium term basis. Hence, we recommend "Subscribe" to the issue.

Source : Equity Bulls

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