Shares of InterGlobe Aviation, the company that runs low-cost carrier IndiGo Airlines, slumped 7 per cent on Tuesday. Traders attributed the selloff in the stock to weak quarterly numbers.
InterGlobe had on Monday reported a 7 per cent fall in net profit for the fiscal first quarter on account of competitive air fares. InterGlobe’s average yield (measure of average fare paid per mile, per passenger) dropped 8 per cent during the quarter because of fall in average ticket prices.
“We have posted yet another profitable quarter. However, profitability was lower than last year primarily because of competitive fare pressures,” said InterGlobe president Aditya Ghosh.
Net profit for the April-June quarter fell to Rs 592 crore, from Rs 639 crore a year ago, while total income from operations rose 8.7 per cent to Rs 4,579 crore.
Market expert Hemindra Hazari said InterGlobe Aviation had run ahead of its fundamentals, so the correction was around the corner.
Technical analyst Ashish Chaturmohta said IndiGo has corrected sharply from Rs 1,150 – Rs 1,100 levels to around Rs 900, so a big fall in unlikely.
“Some amount of base is being formed in this stock and buying interest could emerge around Rs 880 to Rs 900 in IndiGo,” he added.
IndiGo is India’s largest airline, flying about one in three passengers in the country’s booming air travel market, and it increased its fleet size to 109 during the quarter.
The airline said it is slowing down deliveries of Airbus’ A320neo narrow-body planes to allow engine supplier Pratt & Whitney to catch up on the production of upgraded engines.
“The A320neo operations continue to be a challenge,” InterGlobe said in its statement.
Pratt & Whitney, a unit of United Technologies Corp, has encountered problems with slow engine start-up times and erroneous engine software messages in the new engine, already causing a delay in the delivery of planes to Indigo.
IndiGo has ordered a total of 430 A320neo aircraft, making it one of the European plane maker Airbus’ largest customers.
The company also reduced its debt by Rs 459 crore to Rs 2,786 crore by retiring debt related to three aircraft taken on a finance lease.
As of 09.45 a.m., InterGlobe Aviation shares traded 5 per cent lower at Rs 924, underperforming the broader Nifty that was up 0.4 per cent.
Shares of other carriers – Jet Airways and SpiceJet – also fell 1-3 per cent, reflecting bearish sentiments around the aviation sector, post IndiGo’s weak numbers.