Financial Management Project (1)
REPORT ON INDIGO INTERGLOBE AVIATION LTD.
Submitted in partial fulfillment of the requirements for the degree of
MBA - Business Analytics
By:
Devansh Agarwaal (2K19/BMBA/06)
Dhwani Dhingra (2K19/BMBA/07)
Namrit Mehta (2K19/BMBA/11)
Ritika (2K19/BMBA/13)
Supervisor
Ms. Priya Malhotra
University School of Management & Entrepreneurship
Acknowledgement
We four students of MBA Business Analytics of 1st year in University School of
Management and Entrepreneurship, Delhi Technological University have prepared a
project report on “IndiGo Interglobe Aviation Ltd.” We wholeheartedly express our
sincere attitude to Ms. Priya Malhotra who guided us for the completion of this report.
We would also like to thank our teacher for providing us with knowledge about the
critical aspects of the topics related to this report whenever needed.
RITIKA
NAMRIT MEHRA
DHWANI DHINGRA
DEVANSH AGARWAAL
1
Abstract
The report investigates the airline industry’s present and future states in relation to
growth and customer satisfaction in India. The approach of investigation is secondary
data based analysis. The sample of the data is collected from various sources.
The report aims at studying about India’s most successful aviation corporation “IndiGo
Interglobe Aviation Ltd.” In the report it has been mentioned why IndiGo was chosen by
our team and its basic information like history and services. There’s been a business
analysis which included its competition, market growth, etc.
We further conduct a financial analysis of the firm which tells us about the funding, the
projects it's involved in and so on.
As we go further we have a comparative analysis with two other big aviation firms,
namely, Air India and Vistara on the basis of performance, services, finance, etc.
Lastly we have concluded by having ourselves in a hypothetical position where we are
financial advisors and why we would recommend people to invest or not to invest in the
IndiGo Interglobe Aviation Ltd.
2
TABLE OF CONTENTS
Acknowledgement 1
Abstract 2
Table of Contents 3
Introduction 4
IndiGo Interglobe Aviation Ltd. 7
Introduction 7
History 8
Fleet 10
Fleet Developments 11
Services 12
Business Analysis 13
Competitors 13
Market Share 16
Product Basket Offered 16
Significant tie-ups 20
Projects expected to enter 22
Performance in aviation industry 23
Major litigations against IndiGo 25
Dividends announced 26
Major loan taken by IndiGo 26
Financial Analysis 28
Financial Ratios 28
Capital Structure (previous 3 yrs) 30
Major project(s) undertaken 31
Commentary from Balance Sheet notes (previous 3 yrs) 33
Comparative Analysis 36
Scale of Operations comparison with Air India & Vistara 36
Technological leaps/initiatives taken 52
Companies’ share price performance 54
Conclusion 55
References 56
3
INTRODUCTION
Financial management focuses on ratios, equities and debts. It is useful for portfolio
management, distribution of dividend, capital raising, hedging and looking after
fluctuations in foreign currency and product cycles. Financial managers are the people
who will do research and based on the research, decide what sort of capital to obtain in
order to fund the company's assets as well as maximizing the value of the firm for all the
stockholders. It also refers to the efficient and effective management of money (funds)
in such a manner as to accomplish the objectives of the organization.
In the given report we will be selecting an industry and a firm within that industry. After
selection of the firm we’ll be carrying out a few operations like “business analysis”,
“financial analysis” and its “comparative analysis” with the youngest and the oldest
competitor in the industry.
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Reasons to choose IndiGo
In order to select a firm the following parameters were to be kept in mind -
● Minimum 5 years of existence in the industry
Founded in 2005; Commenced business in 2006.
● Share Capital of 500 CR and above
(₹ millions)
(₹ millions)
● Turnover of more than 500 CR per year
Average annual turnover - ₹250 billion.
● Minimum 3 years of reported profits
For the year ended 31 March 2017 - ₹16,591.88 million
For the year ended 31 March 2018 - ₹22,423.74 million
For the year ended 31 March 2019 - ₹1,561.35 million
● Listed on BSESensex / NIFTY50/ BankNIFTY/ S&P BSE Midcap/ S&P BSE Largecap/
S&P BSE SmallCap
Traded as BSE: 539448 NSE: INDIGO
5
India is the 9th largest aviation market in the
world with a size of around US$ 16 billion and
is poised to be the 3rd biggest by mid-2020.
India's aviation industry promises huge growth
potential due to large and growing middle class
population, rapid economic growth, higher
disposable incomes, rising aspirations of the
middle class and overall low penetration levels.
IndiGo,
launched in
2006, had become India's largest airline and a dominant
player, after having taken advantage of market conditions,
including a rise in per capita income that led to increased
demand for air travel. It is the largest aviation airline brand in
India with 48% of market share. As of March 2020, IndiGo’s
Market Capital is ₹40 trillion.
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IndiGo Interglobe Aviation Ltd.
Introduction
IndiGo is an Indian low-cost airline headquartered in
Gurugram, Haryana, India. It is the largest airline in India by
passengers carried and fleet size, with a 48% domestic
market share as of February 2020. It is also the largest
individual Asian low-cost carrier in terms of jet fleet size
and passengers carried, and the sixth largest carrier in Asia
with over 64 million passengers carried in the financial year
2018–19. The airline operates 1500 flights everyday to 87 destinations – 63 domestic and 24
international. It has its primary hub at Indira Gandhi International Airport, Delhi.
The airline was founded as a private company by Rahul Bhatia of InterGlobe Enterprises and
Rakesh Gangwal, a United States-based expatriate Indian in 2006. The company went public in
November 2015.
7
History
IndiGo was founded in 2006 as a private company by Rahul Bhatia of InterGlobe Enterprises and
Rakesh Gangwal, a United States-based [Link] had a 51.12% stake in IndiGo and 47.88%
was held by Gangwal's Virginia-based company Caelum
[Link] placed a firm order for 100 Airbus A320-200
aircraft in June 2005 with plans to begin operations in mid-2006.
IndiGo took delivery of its first aircraft on 28 July 2006, nearly a year
after placing the [Link] commenced operations on 4 August 2006
with a service from New Delhi to Imphal via Guwahati. By the end of
2006, the airline had six aircraft and nine more aircraft were acquired
in 2007. In December 2010, IndiGo replaced state-run carrier Air India
as the third largest airline in India, behind Kingfisher Airlines and Jet
Airways with a passenger market share of 17.3%.
In 2011, IndiGo placed an order for 180 Airbus A320 aircraft in a deal
worth US$15 billion. In January 2011, after completing five years of
operations, the airline got permission to launch international flights. In
December 2011, the DGCA expressed reservations that the rapid
expansion could impact passenger safety.
In February 2012, IndiGo took delivery of its 50th aircraft, less than six
years after it began operations. For the quarter ending March 2012,
IndiGo was the most profitable airline in India and became the second
largest airline in India in terms of passenger market share. On 17
August 2012, IndiGo became the largest airline in India in terms of
market share surpassing Jet Airways, six years after commencing
operations.
In January 2013, IndiGo was the second-fastest-growing low-cost
carrier in Asia behind Indonesian airline Lion [Link] February 2013,
following the
announcement of the
civil aviation ministry
that it would allow
IndiGo to take delivery
of only five aircraft that
year, the airline
planned to introduce
low-cost regional flights by setting up a subsidiary.
Later, IndiGo announced that it planned to seek
permission from the ministry to acquire four more
8
aircraft, therefore taking delivery of nine aircraft in 2013. As of March 2014, IndiGo is the
second-largest low-cost carrier in Asia in terms of seats flown.
In August 2015, IndiGo placed an order for 250 Airbus A320neo aircraft worth $27 billion, making it
the largest single order ever in Airbus history. IndiGo announced a ₹32 billion (US$450 million) initial
public offering on 19 October 2015 which opened on 27 October 2015.
In October 2019, IndiGo placed another order for 300 Airbus A320neo aircraft worth $33 billion (₹2.3
lakh crore), surpassing its own record of the largest single order ever in Airbus history.
In December 2019, the airline became the first Indian airline to operate 1,500 daily flights.] As of
December 31, 2019, the airline's fleet size is more than 250 aircraft, becoming India's first airline to
do so.
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Fleet
As of March 2020, IndiGo operates the following aircraft:
Aircraft In Orders Passengers Notes
service
Airbus 123 — 180 Older aircraft to be phased out by 2022
A320-200
Airbus 100 232] 180
A320neo
186
Airbus 14 384 222 Last 248 orders are a mix of A321LR
A321neo and A321XLR.]
ATR 72-600 25 25 74
Total 261 643
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Fleet Developments
IndiGo placed an order for 100 Airbus A320-200 aircraft worth US$6 billion in June 2005 during the
Paris Air Show with plans to commence operations in mid-2006. The airline received its first A320 in
July 2006 and planned to induct 100 aircraft by 2015–2016. IndiGo signed a memorandum of
understanding for an additional 180 Airbus A320
aircraft including 150 with the New Engine Option
(NEO) worth US$15 billion on 11 January 2011. In
2012, the airline took delivery of its 50th aircraft and
the 100th aircraft was delivered on 4 November
2014, completing its initial order ahead of schedule.
The Airbus A320neo family aircraft ordered in 2011
were to be delivered starting 2015. However, due to
a delay in the production and delivery of these
aircraft, IndiGo dry-leased a total of 22 used aircraft
to cope with the [Link] 15 October 2014,
IndiGo expressed its intention to order a further 250 A320neo aircraft worth US$25.7 billion at list
[Link] 15 August 2015, IndiGo confirmed the order for 250 A320neo aircraft for $26.5 billion. The
order also provides IndiGo the flexibility to convert some A320neos to A321neoLRs that can seat
more passengers and fly on longer routes. The order for 250 jets was Airbus' single largest order by
number of aircraft. IndiGo received the first A320neo in March 2016. On 10 October 2019, Airbus
delivered its 1000th A320neo aircraft to
Indigo. On 29 October 2019, IndiGo
placed a firm order for 300 A320neo
Family aircraft comprising a mix of
A320neo, A321neoLR and A321XLR
aircraft, taking IndiGo's total number of
A320neo Family aircraft orders to 730.
Airbus monthly reports lists the 300 order
as 87 A320neo and 213
A321neoLR/A321XLR.
IndiGo took delivery of its first ATR
72–600 in November 2017. As of 31
December 2019, the airline has more than 250 aircraft in its fleet, being the first Indian airline to
achieve this record.
11
Services
Being a low-cost carrier, IndiGo offers only eco;nomy class seating. To keep fares low, IndiGo does
not provide complimentary meals on any of its flights, though it does have a buy-on board in-flight
meal programme. No in-flight entertainment is available. Hello 6E, the in-flight magazine published
by IndiGo, is available for passengers to read. IndiGo offers premium services, such as a
pre-assigned seat, multiple cancellations and priority check-in, to its passengers who are willing to
pay a higher [Link] September 2019, the company announced its tie up with SonyLIV on demand
video app for providing its fliers with entertainment options at the airport and in flight.
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BUSINESS ANALYSIS
Competitors
Comparison of fares (two weeks advances
booking)
● Fees and surcharges form the major component in prices.
● Highly competitive Prices with very narrow variation.
● No distinguishing service like seat preferences, meal or any other VAS which could set
Indigo apart.
13
On-Time performance
Continuous High performance by Indigo Airlines could be a distinguishing factor
Brand building based on this factor
Competition in International Market
● Competitors include homegrown carriers like Spicejet , Kingfisher and
international LCC like AirAsia , Air Arabia , flyDubai.
● International Operations started from 1 sept 2011.
● 34% route authority in the domestic market is not utilized indicates strong
competition in the domestic segment and higher profit margin in international
routes.
● Key target markets include SE Asia and West Asia flying out from tier II cities like
Trichy , Coimbatore , Amritsar , Kozhikode.
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● Competitive advantages to international carriers due to govt policies (entrance)
and fuel supply chain.
Indigo Market share of Travel portals
● Major crush of booking is coming through the travel portal.
● 2/3rd of online tickets are booked by top 3 travel portals.
15
Market Share
As of February 2020, IndiGo consists of 48 % market share, showing that it has a
monopoly in the aviation sector in the country.
In November 2019 this share was at 47.5% showing that the company is gradually
gaining more market share at a steady pace.
Product Basket Offered
6E Flex
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Under 5 years - 'Flying Solo' service is unavailable, however, the child MUST travel
with someone over the age of 18 years
5-12 years - 'Flying Solo' service is available and can the child can travel on all flights
13-18 years - The child can travel alone or we would be happy to offer the 'Flying
Solo' service
IndiGo Flight Offers
IndiGo provides many offers like booking offers such as discounts, cashbacks, excess
baggage option, discount by particular bank cards, etc.
17
IndiGo offers flight destinations almost everywhere in India and 37 destinations abroad.
Indian Destinations -
● Agartala ● Guwahati ● Patna
● Agra ● Hubli ● Port Blair
● Ahmedabad ● Hyderabad ● Prayagraj
● Aizawl ● Imphal ● Pune
● Amritsar ● Indore ● Raipur
● Aurangabad ● Jabalpur ● Rajahmundry
● Bagdogra ● Jaipur ● Ranchi
● Belagavi ● Jammu ● Shillong
● Bengaluru ● Jodhpur ● Shirdi
● Bhubaneswar ● Jorhat ● Silchar
● Bhopal ● Kannur ● Srinagar
● Chandigarh ● Kochi ● Surat
● Chennai ● Kolhapur ● Thiruvananthapuram
● Coimbatore ● Kolkata ● Tiruchirappalli
● Dehradun ● Kozhikode ● Tirupati
● Delhi ● Lucknow ● Tuticorin
● Dibrugarh ● Madurai ● Udaipur
● Dimapur ● Mangaluru ● Vadodara
● Gaya ● Mumbai ● Varanasi
● Goa ● Mysuru ● Vijayawada
● Gorakhpur ● Nagpur ● Visakhapatnam
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International Destinations -
● Abu Dhabi ● Dublin ● Muscat
● Amsterdam ● Guangzhou ● Paris
● Athens ● Hanoi ● Phuket
● Bangkok ● Ho Chi Minh City ● Prague
● Brussels ● Hong Kong ● Riyadh
● Budapest ● Istanbul ● Sharjah
● Chengdu ● Jeddah ● Singapore
● Colombo ● Kathmandu ● Tel Aviv
● Copenhagen ● Kuala Lumpur ● Vienna
● Dammam ● Kuwait ● Yangon
● Dhaka ● London ● Zurich
● Doha ● Malé
● Dubai ● Malta
19
Group Booking
Significant tie-ups done by IndiGo
CAE ties up with IndiGo to supply simulator trained pilots
20
CAE Inc. is a Canadian manufacturer of simulation technologies, modelling technologies and training
services to airlines, aircraft manufacturers, healthcare specialists, and defence customers. CAE was
founded in 1947, and has manufacturing operations and training facilities in 35 countries.
With an aim to cash in on the booming
Indian aviation market, Canada-based
simulator manufacturer CAE has tied up
with low cost carrier IndiGo to train
around 300 typerated, simulator trained
pilots to the airline in the next five years.
"We have got into an agreement with
IndiGo to train around 300 pilots for them from all our training institutes across the
world," said Jeff Roberts, group president, Innovation and Civil Training Services, CAE.
The contract would be worth more than $6 million in terms of training services. The
pilots will be supplied from CAE's global network of 27 civil and military flight training
institutes.
Going by its aircraft deliveries of around 10 per year, IndiGo would require 500
additional pilots for the next five years, of which 60 per cent will be accounted for by
CAE. IndiGo currently has around 120 pilots, out of which 70 are expatriates.
IndiGo CEO Bruce Ashby said, "Over the next five years, CAE will be a substantial
partner for the supply of pilots for our crew. Since most of them are type rated pilots,
they will not have to undergo any initial type rating training after joining our airline."
While most of these pilots would be expatriates, several of them would also be
recruited from Indian flying schools like the Indira Gandhi Rashtriya Uran Academy
(IGRUA) in Bareilly, Uttar Pradesh, for which it took management rights yesterday and
the Rajiv Gandhi National Flying Training Institute (RGNFTI) in Gondia, Maharashtra,
which will be jointly developed by CAE and the Airports Authority of India (AAI).
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Projects expected to enter
The company is aware of the positive impact that a strong CSR programme can have
on its brand value, such that it can influence consumer behaviour. While these are
welcome side-effects of good CSR work, care needs to be taken that self-interest does
not supersede genuine altruism and social obligations as the reasons for doing CSR.
Monitoring of their programmes is done internally and through monthly and quarterly
reports provided by the partner NGOs, indicating metrics like carbon-emission reduction
status, units installed, economic impact, jobs created, and financial inclusion for village
women. IndiGo also conducts regular on-site visits to assess the projects and evaluate
the progress made. The long-term vision is to emerge as a key CSR player in the
country with best practices, systems and processes, and implement development
programmes through partnerships and decentralised planning.
However, there’s no indication that any new major project will be adopted in the near
future.
Unlike other corporates, IndiGo, thankfully, has limited the scope of its CSR activities. At
the same time, while branching out in terms of its partners and projects on education
can be seen as a smart strategy, one would like to see the company take up its own
flagship programme that has medium- to long-term goals and timelines. This has the
capacity to create truly transformative change for its beneficiaries and the potential to be
scaled up. It can provide invaluable learning and also ensure continuous engagement
and investment from the company instead of sporadic projects that are usually of two to
three years’ duration. Such a programme can be taken up with one of their many
existing NGO partners. Inventive projects that are a natural fit with the company’s core
function, such as sponsoring education and training for would-be pilots and flight
attendants from underprivileged backgrounds, can be explored.
In terms of sustainability, while IndiGo has acknowledged its carbon emissions problem,
much more can be done to reduce it drastically. Its current efforts, while laudable, don’t
go far enough in terms of scope or ambition. Equally worrying is that there seems to be
no indication of benchmarking done (internally or externally), no clear targets or any
rationale provided behind the current goals or programmes. Globally, the most
sustainable and green companies are ensuring that each and every part of their
business has its current emissions and environmental impact thoroughly assessed, and
22
targets are set accordingly, keeping in mind factors such as local and international
regulations and agreements, steps taken by other best-in-class companies, and their
own capabilities and limitations. Metrics like emissions per employee and even
suppliers’ environmental impact and human rights record are being tracked.
There’s much that IndiGo can and should do to ensure that it takes its responsibility and
contribution towards a greener future in a manner befitting the country’s largest airline. It
has already taken the first step – being aware of its own impact; now one would like it to
go several steps further and set an example for the rest of the industry.
Indigo’s performance in aviation industry
Every plane on earth reaches their destination late! Yes, it's true. There are many factors
delaying a plane from slow cabin preparation to late passengers and lazy ATC controllers,
who would keep the plane on hold, almost everywhere.
Indigo on the other hand is actually the quickest! They have low turnaround time. Compared
to other airlines, they have the best on time performance.
Back to topic, the scheduled time is actually a delayed time, so that people think they have
arrived on or before time. It's a psychological as well as business trick.
Let me explain to you with the example of the Guwahati-Kolkata route. It's just around
890km long and a plane(let's take the A320 for example)should take an hour and a half for
it, but in truth the tickets would mention the time way more than that. Nearly two hours or
more.
Always remember everything happening around us is a small piece of a big puzzle. Illusions
are used to keep us satisfied.
23
IndiGo's financial performance from FY 2015 to FY 2019
(in billion Indian rupees).
24
Major litigations against IndiGo
Why did IndiGo’s Rahul Bhatia file a case in the US?
Rahul Bhatia’s decision to start arbitration proceedings against Anupam Khanna in a court in
Maryland seems to indicate a hardening of stand against Rakesh Gangwal, according to Amit
Jajoo, Partner, IndusLaw.
Bhatia had filed the case in courts in the US earlier this week, according to news reports. Bhatia
and Gangwal are the co-promoters of low-cost airline IndiGo who have been engaged in a
public war of words for a while now. Khanna is an independent director on the airline’s board
and is said to be close to Gangwal.
Gangwal had accused Bhatia of not following corporate governance norms, and of entering into
related-party transactions. These and various other issues were addressed at the airline’s AGM
earlier this year.
IndusLaw’s Jajoo thinks the issue before the US courts (Maryland) seems to revolve around
Khanna, who, according to Bhatia and InterGlobe Enterprises (IGE ) group, has been acting in
concert with Gangwal.
Communications retrieval
Corporate lawyers also feel that the proceedings in Maryland appear to have been started to
retrieve communications between Khanna and Gangwal in support of the ongoing arbitration at
the London Court of International Arbitration. The arbitration was initiated by Bhatia alleging
breach of a shareholders’ agreement dated April 23, 2015, which was amended on September
17, 2015, and for causing wrongful losses.
The Maryland court has allowed the request for retrieval of documents by issuing a subpoena to
Khanna to produce them, and also to allow the inspection of his premises.
Jajoo said the rationale behind filing the proceedings in the US court could lie in jurisdictional
constraints. “As Khanna is a resident of Maryland, the courts of the UK where the arbitration
proceedings are on-going do not have jurisdiction over issues such as issuing a subpoena,” he
said.
25
Dividends announced by IndiGo in past 3 years
IndiGo seeks nod for Rs 4.6k-cr loan
Low-cost airline IndiGo has sought the Reserve Bank of
India (RBI)’s approval for an $849-million (Rs 4,661-crore)
loan to finance the purchase of aircraft, indicating a
possible shift in its aircraft acquisition strategy.
In its application to RBI, IndiGo has asked for approval to
raise funds through external commercial borrowings.
According to the RBI website, the loan would be used for
“import of capital goods” and would have a term of 14 years.
IndiGo did not respond to an email seeking comment.
IndiGo operates 64 single-class airbus A320 aircraft on 38 domestic and international
routes. The airline has also ordered 280 Airbus A320s, including 150 A320neo, to be
delivered by 2024. The planes were ordered in two separate deals, valued at about $21
billion at list prices.
26
Industry sources said barring four planes, all aircraft in its fleet had been acquired on a
sale-and-leaseback basis or on ‘operating leases’ for six to seven years. This had helped
the airline limit debt and maintenance costs.
Analysts see the airline’s move as prudent. “IndiGo has 280 planes on order. Since its
launch in 2006, it has been adding about ten aircraft a year and would continue to do
so in coming years. From an asset-management perspective, it seems a prudent move,
as after this, the airline would have a mix of owned and leased planes,” said an industry
source, adding the airline might not have tied up with foreign lenders yet. The
application might be an enabling provision alone, he added.
Typically, airlines acquire planes on financial leases (an aircraft is purchased by the
airline, but hypothecated to a lender till the repayment is complete) or on an operating
lease from a lessor. In case of a financial lease, an airline pays the entire contracted
price to the manufacturer. In case of a sale-and-leaseback deal, an airline orders the
aircraft and makes a pre-delivery payment (usually 20-30 percent of the aircraft cost) as
a commitment to the manufacturer. At the time of delivery, the lessor makes the final
payment on behalf of the airline and leases the plane to that airline.
27
FINANCIAL ANALYSIS
Financial ratios - Debt-Equity ratio, Sales turnover ratio, Interest
Coverage ratio, Profitability ratio of the company, Current Ratio,
(Last 3 years)
Ratio Analysis for INTERGLOBE AVIATION (INDIGO)
28
29
Capital Structure (Last 3 years)
30
Major projects undertaken in last 3 years
INDIGO (Project)
Aside from these programmes, IndiGo was active in disaster-relief operations and
donations for the Kathmandu earthquake and the Chennai floods in 2015. In February
last year, it worked with the Manipur government to transport emergency medicines free
of cost to people affected by the blockades on the national highways. The company has
also been recognised for its disabled-friendly infrastructure in its services, products and
campaigns.
Employee volunteering is encouraged
and all stations are associated with local
NGOs and work closely with them.
IndiGo has partnered with Rajiv Gandhi
Cancer Institute and Research Centre to
raise awareness on preventive
measures for cancer, especially for
children. Overall, according to the
company, its various CSR programmes
have impacted 51,000 individuals
31
through 33 projects in 16 locations across 8 states. In the last FY (2016–17), the
company spent Rs 215.81 million on CSR, with Rs 96.80 million left unused from the
total Rs 312.6 million (2 percent of net profit).
The company is aware of the positive
impact that a strong CSR programme
can have on its brand value, such that
it can influence consumer behaviour.
While these are welcome side-effects of
good CSR work, care needs to be taken
that self-interest does not supersede
genuine altruism and social obligations
as the reasons for doing CSR.
32
Commentary from notes under Balance Sheet (Last 3 years)
INTERGLOBE AVIATION (INDIGO) Balance Sheet Analysis ( yr 16-18)
33
INTERGLOBE AVIATION (INDIGO) Balance Sheet Analysis (yr 17-18)
●
● The company's current liabilities during FY18 stood at Rs 61 billion as
compared to Rs 48 billion in FY17, thereby witnessing an increase of 28.0%.
● Long-term debt down at Rs 22 billion as compared to Rs 24 billion during
FY17, a fall of 6.4%.
● Current assets rose 55% and stood at Rs 146 billion, while fixed assets rose
21% and stood at Rs 46 billion in FY18.
● Overall, the total assets and liabilities for FY18 stood at Rs 211 billion as
against Rs 152 billion during FY17, thereby witnessing a growth of 39%.
INTERGLOBE AVIATION (INDIGO) Balance Sheet Analysis ( yr 18-19 )
● The company's current liabilities during FY19 stood at Rs 80 billion as
compared to Rs 61 billion in FY18, thereby witnessing an increase of
30.8%.
● Long-term debt down at Rs 22 billion as compared to Rs 22 billion during
FY18, a fall of 2.1%.
● Current assets fell 88% and stood at Rs 18 billion, while fixed assets rose
23% and stood at Rs 57 billion in FY19.
● Overall, the total assets and liabilities for FY19 stood at Rs 250 billion as
against Rs 211 billion during FY18, thereby witnessing a growth of 18%.
34
35
COMPARATIVE ANALYSIS
Difference in scale of operations of the company vis a vis Vistara
(youngest) and Air India (oldest)
PROFITS FOR THE YEAR 2015-16
Indigo
Of the total revenues of Rs. 166,013.02 million generated in FY16, 97.2% was
on account of revenue from our operations. Our revenues from operations
comprise primarily of passenger ticket revenue, which we recognise on a flown
basis i.e., when service is rendered. In addition, we also earn revenue from
ancillary products and services. Our ancillary products and services are
composed of:
(i) Revenue from ancillary passenger related services, which mainly consists
of charges for special service requests (including seat selection, charges
for infants, and assistance for unaccompanied minors), ticket modification
or cancellation including expiry of credit shell, excess baggage, lounge
income and convenience fees; and
(ii) Revenue derived from products and services that are ancillary to our
airline passenger services, which mainly consists of cargo services,
in-flight were amortised on a pro rata basis in FY15, based on their
delivery month. While no new delivery of finance lease aircraft took place
in FY16, incentives for all the aircraft on finance lease were amortised
over the entire year.
The breakup of revenue from operations and percentage share of total
revenue from operations is given in the following table:
36
Revenue from operations increased 15.9% from Rs. 139,253.36 million in FY15 to
Rs. 161,399.09 million in FY16 on account of the following:
1) Passenger ticket revenue: Our passenger ticket revenue in FY16 was Rs.
140,624.22 million compared to Rs. 122,938.97 million in FY15, an increase of
14.4%. This was primarily due to 21.2% increase in capacity, 4.2 percentage
points increase in load factors partially offset by 13% reduction in average fares.
2) Revenue from ancillary products and services: Our ancillary revenue increased
by 27.3%, from Rs. 15,724.94 million in FY15 to Rs. 20,019.97 million in FY16.
● Revenue from ancillary passenger related services increased by 37.5%, from Rs.
7,608.24 million in FY15 to Rs. 10,464.66 million in FY16. While the passengers
we carried in this period increased by 31.5%, our revenue from ancillary
passenger related services per passenger increased from Rs. 302 in FY15 to Rs.
316 in FY16, an increase of 4.6%.
● Cargo and inflight sales contributed 97.4% of revenue derived from products and
services ancillary to our passenger services, increasing from Rs. 8,116.70 million
in FY15 to Rs. 9,555.31 million in FY16, an increase of 17.7%. Cargo increased
by 15.9% whereas inflight sales increased by 33.8% in line with increase in
passengers.
Profit before tax (charge)/ benefit
As a result of the above changes, our profit before tax increased 53.2% from Rs.
18,465.23 million in FY15 to Rs. 28,289.50 million in FY16.
Profit after tax
Our profit after tax increased 52.6% from Rs. 13,041.72 million in FY15 to Rs.
19,897.20 million in FY16.
37
Air India (Oldest Player)
Profits for the year 2015-16
1) Total revenue decreased from Rs.206,131.6 Million in 2014-15 to Rs.205,261.1
Million during 2015-16 (decrease of Rs.870.5 Million
2) Operating Revenue increased from Rs.198,017.1 Million in 2014-15 to
Rs.1,99,923.3 Million during 2015-16 (increase of Rs.1,906.2 Million)
3) Passenger Revenue decreased from Rs.157,933.6 Million last year to
Rs.156,562.5 Million during 2015-16 (decrease of Rs.371.1 Million).
38
Air India Air Transport Services Limited (AIATSL):
AIATSL operations along with nancials will continue to achieve higher trajectory
growth in the coming years. The major earnings are from handling international ights
thereby the foreign exchange inow will be available towards foreign procurement as
well as possibly deriving foreign exchange gains in revenue earnings to the Company.
AIATSL with Pan India presence is to be the market leader in the country and with its
capability should be able to venture into few of the foreign countries wherever Air
India is operating.
Air India Charters Limited (AICL):
During 2015-16 AICL carried 2.80 Million passengers as against 2.62 Million during
2014-15. The capacity offered by the Airline increased by 7% from 8,161 Million to
8,730 Million in 2015-16. The Scheduled Services Revenue increased substantially
from Rs.26,164.60 Million in 2014-15 to Rs.29,097.80 Million.
Air India Engineering Services Limited (AIESL):
39
Airline Allied Services Limited:
Vistara (Youngest Player)
Figures are in Rs in millions
The company suffered from losses in the year 2015-2016 ie 4009.1 Millions
40
PROFIT FOR THE YEAR 2016-17
Indigo
The total income increased from Rs. 166,550.30 million to Rs. 193,695.70 million
thereby registering an increase of 16.30% over the previous financial year. The Profit
after tax decreased from Rs. 19,861.61 million to Rs. 16,591.88 million, a decline of
16.46% over the previous financial year. For details, please refer to the financial
statements forming part of this Annual Report.
Air India
REVENUE
1. Total revenue increased from Rs.206,103.3 million in 2015-16 to Rs.221,776.8
million during 2016-17 (increase of Rs.15,673.5 million)
2. Operating Revenue increased from Rs.202,108.3 million in 2015-16 to
Rs.218,596.1 million during 2016-17 (increase of Rs.16,487.8 million)
3. Passenger Revenue increased from Rs. 156,562.5 million last year to Rs.15
Rs.3,415.6 million).
41
Air India Air Transport Services Limited (AIATSL)
42
Air India Express Limited (AIXL)
Air India Express began its Summer Schedule 2016 operations with 387
departures per week. By the end of the Schedule the Airline inducted 5 more
aircraft in its eet and the number of departures rose to 531 per week as
compared to 375 departures per week in the Summer 2015 Schedule. The
Company reported net prot for the second consecutive year besides
generating substantial cash prot. The net prot for Financial Year 2016-17 was
Rs.2967.45 million as against Rs.3616.82 million during the year 2015-16.
The cash prot was Rs.5909.05 million.
Air India Engineering Services Limited (AIESL)
43
Airline Allied Services Limited (AASL)
Vistara (Youngest Player)
PROFIT FOR THE YEAR 2017-18
Indigo
44
The total income increased from Rs. 193,695.70 million to Rs. 239,677.43
million thereby registering an increase of 23.74% over the previous financial
year. The Profit after tax increased from Rs. 16,591.88 million to Rs.
22,423.74 million, a growth of 35.15 % over the previous financial year. For
details, please refer to the standalone financial statements forming part of this
Annual Report.
Air India
REVENUE
1) Total revenue increased from Rs.221,971.0 million in 2016-17 to
Rs.239,004.8 million during 2017-18 (increase of Rs.17,033.8 million).
2) Operating Revenue increased from Rs.218,270.7 million in 2016-17
to Rs.230,036.7 million during 2017-18 (increase of Rs.11,766.0 million)
3) Passenger Revenue increased from Rs.160,201.2 million last year to
Rs.177,440.9 million during 2017-18 (increase of Rs.17,239.7 million).
45
Air Transport Services Limited (AIATSL)
Air India Express Limited (AIXL)
46
Air India Express began its Summer Schedule 2017 operations with 549 departu
per week. By the end of the Winter Schedule 2017-18, the number of we
departures rose to 600. The Company reported net prot for the third consecu
year besides generating substantial cash prot. The net profit for Financial Y
2017-18 was Rs.2620.45 million as against Rs.2354.15 million during the y
2016-17. The cash prot was Rs.5052 million.
Air India Engineering Services Limited (AIESL)
Airline Allied Services Limited (AASL)
47
Products offered by Indigo
Indigo airlines provide 2 types of products-
1)On ground services
2)In flight services
Core Product
The core product of indigo airlines is that they provide low cost passenger air
transportation for middle class and lower middle class customers so that they can
also experience flight journeys.
Supplementary Product
Along with the core product they also offer a supplementary product. They are
like Check in , Food on board ,Connecting flight while traveling where the service is
not available, Complementary gifts along with the travel, In-flight entertainment such
as music, movies games and Frequent flier programs
Augmented Product
A commodity that has both the primary physical attributes and the
non-physical attributes that are added to increase the product's value. They
Augmented product are-
• O
nline booking
• Variety of meal options
• Pick up and drop service
• Mobile ticketing
48
Products offered by Air India
● Passenger Handling
● Ramp Handling
● Cargo Handling & Warehousing
● Technical Assistance
● Diverted Flight Handling
● VVIP & Charter Handling
● Airport Handling Training & Development
● ULD Repair Facility
● Aircraft Recovery Assistance
● Engineering /Allied Services
Products offered by Vistara
Services
● Charter Booking
● Group Booking
● Cargo
● Travel Certificate
● Inflight Magazine
Vistara Airlines
Premium Economy Seats
49
Market share among various airlines
50
Reasons for the significant difference
1. Air India’s Operating Revenue increased from Rs.198,017.1 Million in 2014-15 to
Rs.1,99,923.3 Million during 2015-16 (increase of Rs.1,906.2 Million) and
Passenger Revenue decreased from Rs.157,933.6 Million last year to
Rs.156,562.5 Million during 2015-16 (decrease of Rs.371.1 Million).
2. While Indigo’s Revenue from operations increased 15.9% from Rs. 139,253.36
million in FY15 to Rs. 161,399.09 million in FY16 on account of the following:
3. Passenger ticket revenue: passenger ticket revenue in FY16 was Rs. 140,624.22
million compared to Rs. 122,938.97 million in FY15, an increase of 14.4%. This
was primarily due to 21.2% increase in capacity, 4.2 percentage points increase
in load factors partially offset by 13% reduction in average fares.
4. Revenue from ancillary products and services: Our ancillary revenue increased
by 27.3%, from Rs. 15,724.94 million in FY15 to Rs. 20,019.97 million in FY16.
Revenue from ancillary passenger related services increased by 37.5%, from Rs.
7,608.24 million in FY15 to Rs. 10,464.66 million in FY16. While the passengers we
carried in this period increased by 31.5%, our revenue from ancillary passenger related
services per passenger increased from Rs. 302 in FY15 to Rs. 316 in FY16, an increase
of 4.6%.
Cargo and inflight sales contributed 97.4% of revenue derived from products and
services ancillary to our passenger services, increasing from Rs. 8,116.70 million in
FY15 to Rs. 9,555.31 million in FY16, an increase of 17.7%. Cargo increased by 15.9%
whereas inflight sales increased by 33.8% in line with increase in passengers.
Thus indigo’s profit increased as compared to previous year
While vistara suffered from losses as it was a new venture and not many products were
offered as compared to indigo.
Indigo still offers a lot of benefits to its customers but air india also has a variety of
products still it suffers from losses in 2-3 companies out of the total 5 companies every
year.
51
Technological leaps/initiatives taken by IndiGo their benefits
To become the market-leader in a span of thirteen years in a challenging category and
a complex market like India is no mean feat. Many airline brands arrived on the Indian
runway but few managed to take off and then stay in cruise mode. The list of airline
brand debacles in the last few years includes ModiLuft, Damania, EastWest, Archana,
Paramount, Sahara, Kingfisher and Jet. In comparison the survivors are a handful. So
when India’s largest airline brand IndiGo, which has a market share of 48.1% as per the
most recent DGCA figures, cuts its birthday cake, it’s a big deal.
To boost load factor at its recently launched international flights, low-cost carrier IndiGo
on Sunday launched a brand campaign called 'IndiGo Abroad: Happy to be your first'.
Earlier this year, the airline launched flights to Turkey, China, Vietnam, Myanmar and
Saudi Arabia.
The Indian airline, which adds an aircraft to its fleet every week, is in discussions to buy
a longer-range version of the European planemaker’s newest narrow-body jet,
according to Chief Executive Officer Ronojoy Dutta. Existing orders will see IndiGo
through the next two years, Dutta said in an interview with Bloomberg News
Editor-in-Chief John Micklethwait. After that, the carrier is considering adding new
planes including Airbus’s long-distance A321neo LR and the yet-to-be-released.
"The campaign aims to introduce Indian travellers and new unexplored 6E destinations
to encourage first-time international travellers and experiential travellers to look beyond
the regular international destinations, for their next trip abroad with IndiGo," the airline
said in a statement.
As part of this campaign, the airline said it has used "quirky creatives that tug
(passengers) emotions when passengers travel, with the backdrop of the most scenic
locations in its international network.
The passengers in the creatives showcase the experiences and emotions during their
first international trip and how IndiGo has been their partner, by making international
travel accessible and affordable.
Buying Big
Though Dutta didn’t specify the size of IndiGo’s next purchase, it’s likely to be a
multi-billion-dollar order based on the company’s history. Its smallest order so far was
for 100 A320 jets in 2005 worth $6 billion at list prices at the time. Given that the
52
most-basic variant of the A320neo family today carry sticker prices of more than $100
million each, a large order could exceed $10 billion.
Top Customer
IndiGo has specialized in buying in bulk, ordering 430 jets in the A320neo family on top
of an initial contract for 100 older A320 models. That’s made IndiGo one of the biggest
buyers of Airbus’s best-selling plane. Such large-scale orders help airlines negotiate
discounts and better maintenance terms.
The stock of IndiGo has a strong negative correlation with Brent crude oil prices. According
to an estimate of foreign brokerage Morgan Stanley, Indigo’s EPS moves down 11% for
every 1% increase in fuel prices. With Brent crude oil prices falling 34% from their peak of
$85 to $55.6 per barrel, there’s scope for significant improvement in IndiGo’s EPS.
A cumulative impact of these factors could be seen in the EPS trajectory of IndiGo.
According to Bloomberg, IndiGo’s EPS is expected to show dramatic improvement to Rs
64.64 in FY20 from Rs 12 in FY19 as the above factors play out. The stock has fallen in the
past six months wherein growth in yields and earnings had been low. As operating leverage
improves further, the stock could soar.
53
Performance of IndiGo's share price vis a vis Air India & Vistara for
last 52 weeks
NOTE - Both the
competitors of
IndiGo, i.e., Air
India and Vistara
are not registered
in the stock market
hence their share
value could not be
calculated.
54
Conclusion
As financial advisors our recommendation about whether to invest
in IndiGo Interglobe Aviation Ltd.
All these analyses have given me an insight about the past, present and future of the IndiGo
Interglobe Aviation Ltd. We can see that IndiGo is providing great services as compared to the
other airlines. It’s share prices have been staying stable mostly. As compared to both Vistara
and Air India on the basis of their profits and turnover we can say that IndiGo had greater profits
and turnover over the past few years making it the most profitable of the aviation industry in
India. It has been providing many services and offering benefits and keeps on working on their
betterment which helps in customer satisfaction hence attracting more and more customers
increasing ticket sales, hence increasing turnover and due to the cost effective way of carrying
out operations result in increasing profits. As financial advisors, we would like to advise people
to invest into IndiGo Interglobe Aviation Ltd.
55
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