InterGlobe Aviation

Investment case

67% share; bought at the fuel trough

Why this business

IndiGo is India's largest airline, an Airbus A320-family low-cost carrier operating 432 aircraft to 97 domestic and 46 international destinations (Q1FY27). It carried 80.8 lakh domestic passengers in July 2026 for a record 67.4% domestic market share (Air India group 24%, Akasa 5.5%, SpiceJet 1.6%). International is ~33% of capacity and targeted at ~40% by 2030; it has ~900 aircraft on order for delivery through 2035.

What we believe

1. 01Structural monopoly-like domestic position: record 67.4% domestic share in Jul-2026 (DGCA) while Tata group fleet shrank 13% YoY, giving IndiGo pricing power - yields +21% YoY in Q1FY27 and PRASK guided +25% in Q2FY27.
2. 02The FY26 loss (Rs -2,394 cr) and Q1FY27 loss are fuel/FX-led, not demand-led: fuel cost +86% YoY (Rs 10,833 cr) after Brent rose ~50% and Singapore jet fuel ~120% post the late-Feb-2026 West Asia conflict; ex-forex Q1 loss was only ~Rs 6 cr.
3. 03Operating leverage on normalisation: FY25 EBITDA was Rs 18,102 cr (22% margin) on Rs 80,803 cr revenue; any retracement of ATF from ~Rs 140/l toward the pre-conflict level restores multi-thousand-crore profits, hence Buoyant's PE collapsing from 141x FY27e to 64x FY28e.
4. 04Long-runway growth: ~900 aircraft on order to 2035, 1,000+ LEAP engine MoU, international share 33% heading to 40% by 2030; capacity growth deliberately held to +2.9% in Q1 to protect yields.
5. 05Balance-sheet resilience: Rs 52,885 cr cash at Jun-2026 against mostly lease-related borrowings of Rs 77,749 cr lets it outlast SpiceJet (negative net worth) and weaker peers through the fuel spike.

Why now

TTM PE not meaningful (TTM net loss Rs 4,808 cr). P/B 27.7x on a depleted book (Rs 180/share); pre-crisis the stock traded ~20-25x forward EPS, the market is looking through FY27 to a normalised FY28 (Buoyant sheet: 141x FY27e / 64x FY28e). EV/EBITDA n.m.; dividend yield 0.2%.

Market disagreement

• SpiceJet: SpiceJet has negative reserves (Rs -3,356 cr, book value Rs -18/share), Rs 4,219 cr borrowings, only 1.6% market share and a Rs 234 cr Q1FY27 loss on Rs 1,120 cr revenue - not an investable franchise.
• Air India (unlisted): Not listed; Tata group fleet down 13% YoY and 24% share with a loss-making legacy full-service model, so IndiGo is the only liquid, scaled way to own Indian aviation growth.

Position sizing

Core Large cap  2.7% of the PMS on $31 Jul 2026 (August rank 14). Core positions are owned through the cycle for leadership and cash-flow quality.

Catalysts

• Q2FY27 results (late Oct/early Nov 2026): guided PRASK +25% YoY, flattish capacity - a return to profit would validate the fuel-only thesis.
• Monthly ATF resets (1-Oct, 1-Nov 2026) and any de-escalation in West Asia / Strait of Hormuz lowering crack spreads.
• Winter schedule international expansion (A321XLR/A350 inductions) and DGCA monthly share data showing continued 65%+ share.

Risks and response

• Sustained ATF above Rs 120-140/l (fuel ~40% of costs) with a weak rupee would keep FY27 loss-making; Buoyant's 141x FY27e implies very thin earnings.
• Demand elasticity: July-2026 domestic traffic already fell 4.8% YoY as fares rose; further yield increases may not stick.
• Promoter overhang: promoter holding down 26.2 pts over 3 years to 41.6% as the Gangwal family exits; plus large lease liabilities (borrowings Rs 77,749 cr).

Thesis-break conditions

Not stated separately on this page; the risk list carries the monitoring triggers.

Review history

• 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p56) · portfolio as of $31 Jul 2026
• 31 Aug 2026 · Classification in the August top-30: Cyclical (July book: Core)

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p56. Internal; external publication of these fields is controlled by audience policy.