Interglobe Aviation Ltd:Annual Report 2023-24 Analysis

InterGlobe Aviation Ltd. (IndiGo): A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

• InterGlobe Aviation Ltd., operating as IndiGo, was founded in 2006 by Rahul Bhatia and Rakesh Gangwal.

Headquarters Location and Global Presence:

• Headquarters: Gurugram, Haryana, India.
• Global Presence: Primarily focused on the Indian domestic market, IndiGo also operates international flights to various destinations in Asia, the Middle East, and Europe.

Company Vision and Mission:

• Vision: To be the leading provider of hassle-free, affordable air travel in India and beyond.
• Mission: Not explicitly stated in all documents, but revolves around providing on-time performance, courteous and hassle-free service, and affordable fares.

Key Milestones in Their Growth Journey:

• 2006: Launch of IndiGo’s first flight.
• 2010: Became the third largest airline in India in terms of market share.
• 2011: Ordered 180 Airbus A320neo aircraft.
• 2015: Initial Public Offering (IPO) on the Indian stock exchanges.
• 2019: Surpassed Jet Airways to become the largest airline in India.
• Expansion: Continued expansion of domestic and international routes throughout the years.

Stock Exchange Listing Details and Market Capitalization:

• Listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
• Market Capitalization: Variable depending on market conditions. Please check the latest financial websites like NSE, BSE, or Yahoo Finance for the most up-to-date information.

Recent Financial Performance Highlights:

• Recent financial performance data is variable and requires real-time access to financial reports. Refer to IndiGo’s quarterly and annual reports available on their investor relations website or financial news outlets (e.g., The Economic Times, Bloomberg, Reuters) for the most up-to-date information.

Management Team and Leadership Structure:

• CEO: Pieter Elbers
• Information on other key management personnel (CFO, COO, etc.) can be found on InterGlobe Aviation’s investor relations section of their official website or on business news sites.

Any Notable Awards or Recognitions:

• Awards for on-time performance, customer service, and being a top airline by various aviation and travel industry organizations.

Their Products #

Complete Product Portfolio with Categories:

• Core Product: Air transportation services for passengers.
• Ancillary Services:
  • Pre-booked meals
  • Seat selection
  • Excess baggage allowance
  • Priority check-in
  • Travel insurance
  • Cargo services
  • Charter services
  • 6E Add-ons (options like fast forward, flexi, etc.)

Flagship or Signature Product Lines:

• Focuses on providing a standardized, no-frills air travel experience at affordable prices.

Key Technological Innovations or Patents:

• Emphasis on technology for efficient operations, booking processes, and customer service.

Quality Certifications and Standards:

• Compliance with all relevant aviation safety and operational standards set by regulatory bodies.

Any Unique Selling Propositions or Technological Advantages:

• Low-Cost Carrier Model: Focuses on cost efficiency to offer competitive fares.
• On-Time Performance: Strong reputation for punctuality.
• Modern Aircraft Fleet: Airbus A320 family aircraft, known for fuel efficiency.

Primary Customers #

Target Industries and Sectors:

• Travel and tourism
• Business travel
• Leisure travel
• Students and migrant workers

Geographic Markets (Domestic vs. International):

• Primarily domestic Indian market.
• Expanding international routes to Southeast Asia, the Middle East, and select European destinations.

Major Client Segments:

• Individual travelers (leisure and business)
• Corporate clients (business travel arrangements)
• Travel agencies

Distribution Network and Sales Channels:

• Online booking through IndiGo’s website and mobile app.
• Travel agencies
• Call centers
• Airport ticket counters

Major Competitors #

Direct Competitors in India and Globally:

• India: Air India, SpiceJet, Vistara, Akasa Air.
• Globally: AirAsia, Ryanair, and other low-cost carriers on international routes.

Comparative Market Share Analysis:

• Market share data fluctuates. Consult recent reports from aviation industry analysts (e.g., CAPA India, IATA) for current market share information.

Competitive Advantages and Disadvantages:

• Advantages: Strong brand recognition in India, large and relatively young fleet, efficient operations, low-cost structure.
• Disadvantages: Dependence on domestic market, vulnerability to fuel price fluctuations, intense competition.

How They Differentiate from Competitors:

• Focus on on-time performance, operational efficiency, and affordability.

Future Outlook #

Expansion Plans or Growth Strategy:

• Expanding domestic and international route network.
• Increasing fleet size with Airbus A320neo family aircraft.
• Focusing on operational efficiency and cost management.

Upcoming Products or Innovations:

• Further development of ancillary revenue streams.
• Enhancements to customer service and digital experience.

Sustainability Initiatives or ESG Commitments:

• Information on sustainability initiatives is found on the company’s investor relations site, sustainability reports and press releases.

Industry Trends Affecting Their Business:

• Rising fuel prices
• Increasing competition
• Economic conditions in India and globally
• Aviation infrastructure development
• Changes in government regulations

Long-Term Vision and Strategic Goals:

• To maintain its position as the leading airline in India.
• To expand its international presence and become a significant player in the Asian aviation market.
• To provide sustainable and profitable air transportation services.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: FY2024: ₹689,043 million, FY2023: ₹544,464.53 million, 26.6% year-on-year growth.
• Profit After Tax: FY2024: ₹81,725 million (profit), FY2023: ₹(3,057.89) million (loss).
• EBITDAR Margin: FY2024: 25.5%, FY2023: 13.4%.
• Earnings Per Share (Basic): Increased to ₹212 from (₹7.93) in FY2023.
• Load Factor: Increased to 85.9% in FY2024 from 82.1% in FY2023.
• Total Cash: FY2024 showed a 48.3% increase up to ‘347,375.29 million.
• Employees:Increased by 14.8%.
• CASK Ex-Fuel: Decreased by 3.6%.
• RASK: FY2024 at 4.96, from 4.80 in FY2023.
• CASK: FY2024 4.38, from 4.83 in FY 2023.

Business Segment Performance #

• Revenue from operations: Increased by 26.3%.
• Ancillary products and services revenue: Increased by 20.9%.
• ASK: Increased by 21.8%
• RPK: Increased by 27.5%.
• Cargo: Domestic cargo tonnage grew by 20.2%, international tonnage by 3.7%.
• Daily Flights: Increased by 11%.

Major Strategic Initiatives and Their Progress #

• “Towards New Heights and Across New Frontiers” Strategy: Focuses on Reassure, Develop, and Create pillars. Financial targets and operational milestones achieved.
• International Expansion: Added 7 new international destinations. Codeshare agreements with Turkish Airlines and Qantas expanded connectivity.
• Fleet Expansion: Fleet grew with additional aircraft every week and now consists of 367.
• Digital Transformation: PSS upgraded, and 6Eskai AI conversational channel implemented.
• Sustainability Initiatives: Fleet renewal with A320neo and A321neo aircraft (78% of the fleet), aiming for further reduction in CO2 emissions.
• Customer experience: Introduction of “6E Eats”.
• Inclusivity: IndiGo provided exceptional service to travelers with disabilities.

Risk Landscape Changes #

• Operational Risks: Supply-chain issues affecting spare engine availability, requiring mitigation through lease extensions and additional aircraft.
• Environmental, social, and governance risk: Mitigated by investing in a young fleet of Airbus.
• Competition: Addressed through cost leadership, customer service, and network expansion.
• Fuel Price and Foreign Exchange Volatility: Managed through fuel efficiency measures and foreign currency revenue hedging.
• Cybersecurity: Implementing security controls for prevention, detection, and response.
• Airline Security: IndiGo took various steps to ensure security at all levels of the organization.

ESG Initiatives and Metrics #

• Environmental:
  • CO2 reduction of 19% per available seat kilometre from FY2016 to FY2024.
  • 86% of the fleet compliant with Chapter XIV noise standards of ICAO.
  • 100% fleet of electric coaches in Ahmedabad.
  • Upcycling of 5,000 retired seat covers.
  • Initiatives for water conservation and reduced waste.
• Social:
  • Diversity and Inclusion: 44% women in the workforce.
  • Employee training hours: 3.7 million+.
  • Reach out to over 41,000 women and 1000 transgenders.
  • CSR (IndiGoReach): Impacted lives of 41,000 underprivileged women and children, and 1,000 transgenders.
• Governance:
  • Whistleblower Policy and Ethics Week celebrations.
  • Code of Conduct (6E Code) for employees and management.

Management Outlook #

• Anticipates continued growth in the Indian aviation market, supported by rising disposable income and increased travel demand.
• Plans to double in size by 2030, supported by an order book of 980 aircraft.
• Focus on expanding domestic and international network, including new destinations.
• Continuous investment in people, processes, and technology to support expansion.
• Strong focus on cost leadership, customer service, and operational efficiency.
• FY2025 outlook includes double-digit growth in capacity and passengers.

Detailed Analysis #

Financial Position Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

Assets #

Liabilities #

Equity #

Significant Changes in Major Line Items (>10% YoY) #

• Property, Plant and Equipment: Increased by 71.26% YoY, primarily due to additions during the year.
• Right of Use Assets: Increased by 28.89% YoY, attributable to the increase in number of leased aircraft, and engines
• Intangible Assets: Increased by 351.52% YoY, because of additions in computer software.
• Investments (Non-Current): Increased by 548,797.06%, mainly because of investment made in bonds.
• Other Financial Assets (Non-Current): Increased by 116.18%, primarily due to an increase in security deposits.
• Investments (Current): Increased by 34.74% YoY, reflecting higher investment in mutual funds.
• Bank balances other than cash and cash equivalents: Increased by 51.60%, due to increase in term deposits made by the Group
• Other Financial Asset (Current):Increased by 66.21%, due to increase in interest accrued.
• Other Equity: Improved substantially from a negative balance of (66,320.63) to a positive balance of 16,104.53, due to Profit for the year
• Lease Liabilities (Non-Current): Increased by 17.51% YoY, due to addition of new aircraft taken on lease during the year.
• Other Financial Liabilities (Non-Current): Increased by 17.15% YoY, primarily due to increase in supplementary rentals.
• Provisions (Non-Current): Increased by 66.97% YoY, mainly due to increase in provision for maintenance, redelivery and overhaul costs.
• Borrowings (Current): Decreased by 15.99% YoY, from 22,523.37 to 18,917.07.
• Other Financial Liabilities (Current): Increased by 172.19% YoY, primarily due to increase in supplementary rentals, aircraft maintenance and capital creditors.
• Provisions (Current): Increased by 103.34% YoY, mainly due to increase in provision for maintenance, redelivery and overhaul costs.
• Other Current Liabilities: Increased by 28.74% YoY, primarily due to higher forward sales.

Working Capital Trends #

Working capital is calculated as current assets minus current liabilities.

• FY 2024: 358,531.17 - 307,983.18 = 50,547.99
• FY 2023: 261,487.14 - 238,511.46 = 22,975.68
• FY 2022: 228,655.42 - 248,336.52 = (19,681.10)

Analysis #

The Group’s working capital has turned positive as on March 31, 2024 after remaining negative in FY 2022 and FY 2023 and significantly improved from FY 2023 to FY 2024 primarily due to higher Investments and increase in Bank Balances.

Debt Structure and Maturity Profile #

Debt Structure #

• Secured Term Loans (Foreign Currency): 917.07 (as on March 31,2024)
• Working Capital Loans (INR): 18,000.00 (as on March 31, 2024)
• Lease Liabilities: 493,883.13 (as on March 31, 2024)

Maturity Profile #

• Foreign Currency Term Loan: Repayable in two equal installments between April 2024 - June 2024.
• Working Capital loans: Repayable in 3 to 9 days from the balance sheet date.
• Lease Liabilities: Detailed maturity profile is provided in Note 17.b. Cash outflows for lease payments are spread out over several years, extending beyond five years.

Off-Balance Sheet Items #

• Contingent Liabilities (Note 31): These include various tax disputes and legal claims. The potential financial impact, if any, cannot be reliably estimated due to ongoing legal proceedings.
• Commitments (note 32): Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 6,127,479.97 Million.

Revenue Breakdown by Segment/Geography (with Growth Rates) #

• Passenger Services: FY2024: ₹646,089.29 million; FY2023: ₹512,577.60 million. Growth: 26.05%.
• Cargo Services: FY2024: ₹17,943.97 million; FY2023: ₹15,837.01 million. Growth: 13.30%.
• In-flight Sales (Traded Goods): FY2024: ₹9,835.39 million; FY2023: ₹7,662.06 million. Growth: 28.36%.
• Other Operating Revenue:
  • Incentives: FY 2024: 476.04; FY 2023: 476.04 Growth: 0%
  • Subsidies : FY 2024:4,113.34, FY 2023: 3,600.19, Growth: 14.25%
  • Others: FY 2024: 10,585.39, FY 2023: 4,311.63, Growth: 145.5%
• Domestic: FY2024: ₹537,183.65 million; FY2023: ₹427,959.76 million. Growth: 25.52%.
• International: FY2024: ₹151,859.77 million; FY2023: ₹116,504.77 million. Growth: 30.34%.

Cost Structure Analysis #

• Aircraft Fuel Expenses: FY2024: ₹239,045.78 million (33.54% of total income); FY2023: ₹236,460.17 million (42.32% of total income).
• Employee Benefits Expense: FY2024: ₹64,618.56 million (9.07% of total income); FY2023: ₹47,947.52 million (8.58% of total income).
• Depreciation and Amortisation: FY2024: 64,257.29, FY2023: 51,029.69, Growth:25.92%
• Finance Costs: FY2024: ₹41,693.54 million (5.85% of total income); FY2023: ₹31,317.31 million (5.60% of total income).

Margin Analysis (with Trends) #

• Net Profit Margin: FY2024: 11.9% ; FY2023: (0.6%). Change: 12.4 percentage points.

Operating Leverage #

• Operating leverage cannot be directly calculated because EBIT is not directly provided.
• It’s observed that revenue increased by 27.47% while total expenses increased by 12.46%.

EPS Analysis #

• Basic EPS: FY2024: ₹211.71; FY2023: (₹8.22).
• Diluted EPS: FY2024: ₹211.48; FY2023: (₹8.22).

Cash Management: Financial Analysis (FY 2024 vs. FY 2023) #

Cash Flow Components (Consolidated, in millions) #

• Operating Cash Flow (OCF): Increased to ₹212,175.75 from ₹127,279.39.
• Investing Cash Flow (ICF): Net cash used increased to ₹(118,089.91) from ₹(40,594.88).
• Financing Cash Flow (FCF): Net cash used decreased to ₹(99,785.28) from ₹(84,324.60).

Working Capital Management Efficiency #

• Receivable days: 116 for FY 2024, compared to 126 in FY2023.
• Payable days (aircrafts and engines): 133 in FY 2024, compared to 108 in FY2023.

Dividend and Share Buyback #

• No dividend was declared or paid during FY 2024.
• No share buyback program is mentioned.

Debt Service Coverage #

• Debt Service Coverage Ratio (DSCR) improved to 1.84 in FY 2024 from 1.22 in FY 2023.

Liquidity Position #

• Total cash, bank deposits, and investments (including under lien) increased to ₹347,375.29 as of March 31, 2024, from ₹234,243.03 the previous year.

Financial Analysis: Key Performance Indicators #

Profitability Ratios (3-Year Trends) #

• Return on Equity (ROE): Not Determinable for FY2024 and FY2023 due to negative average net worth. FY 2024 shows a positive net worth.
• Return on Assets (ROA): Not directly calculable from available data.
• Return on Invested Capital (ROIC): Not directly calculable, but a related metric, Return on Capital Employed, excluding certain lease liabilities, was 18.40% for FY2024 and 4.28% for FY2023. This is calculated as EBIT divided by average capital employed.
• Net Profit Margin: FY2024: 11.9%, FY2023: -0.6%. Indicates a significant improvement in profitability.
• EBITDAR Margin: FY2024: 25.5%, FY2023: 13.4%. Showing strong recovery.

Liquidity Metrics #

• Current Ratio: FY2024: 1.16, FY2023: 1.10 (Consolidated), FY2024: 1.16, FY2023: 1.09 (Standalone). Indicates slight improvement to meet short-term obligations.
• Quick Ratio: Not directly calculable from available data (requires breakdown of current assets beyond inventory).
• Cash Ratio: Not directly calculable from available data.

Efficiency Ratios #

• Asset Turnover: Not directly calculable from available data.
• Inventory Turnover: FY2024: 106.24 (Consolidated data), FY2023: 67.56 (Consolidated data), FY2024:NA FY2023:NA (Standalone data). Represents In-flight sales. A significant increase suggests improved inventory management or higher sales of in-flight products.
• Receivables Turnover: FY2024: 115.94 (Consolidated), FY2023: 125.72 (Consolidated). Shows slightly decreased efficency.

Leverage Metrics #

• Debt-to-Equity Ratio: FY2024: 26.54 (Consolidated), FY2023: -7.12 (Consolidated). FY2024 shows positive equity. A negative ratio in FY2023 indicated negative equity.
• Interest Coverage Ratio: Not directly calculable from available data, as EBIT is not isolated.

Working Capital Ratios #

• Net Capital Turnover Ratio: FY2024: 26.66 (Consolidated), FY2023: 46.66 (Consolidated).

Industry Comparison #

The document does not provide industry averages for direct comparison. Therefore, definitive statements about deviations cannot be made.

Business Segments: Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Total Income: Increased by 27.47% to ₹712,311.63 million in FY 2024 from ₹558,814.18 million in FY 2023.
• Revenue from Operations: Increased by 26.6% from ₹544,464.53 million in FY 2023 to ₹689,043.42 million in FY 2024.
  • Passenger ticket revenue increased by 26.3%.
  • Ancillary products and services revenue increased by 20.9%.
• Other Income Increased by 62.2%
• Profit After Tax: The Company reported a net profit of ₹81,724.68 million in FY 2024 against a net loss of ₹3,057.89 million in FY 2023.
• Profit Before Tax: Increased from a Loss of (3,043.85) million to a Profit of 80,493.09
• EBITDAR Margin: Increased by 12.0 percentage points, from 13.4% in FY 2023 to 25.5% in FY 2024.
• Net Profit Margin: Increased by 12.4 percentage points, from -0.6% in FY 2023 to 11.9% in FY 2024.
• RASK: Increased by 3.2%.
• CASK: Decreased by 9.3%
• CASK EX-FUEL: Decreased by 3.6%

Market Share and Competitive Position #

• IndiGo is the largest airline in India, with over 2,000 daily flights.
• IndiGo is seventh-largest globally regarding daily departures.
• IndiGo is the youngest airline globally to welcome 100 million customers in a calendar year.
• IndiGo has four key customer promises, affordable, on time performance, courteous and hassle-free service, and unparalleled network, which positions them globally.
• IndiGo placed the largest-ever single aircraft order of 500 aircraft.

Key Products/Services Performance #

• Passenger Services: Represent the majority of revenue, contributing 94.60% of total turnover.
• Cargo Services: Domestic cargo tonnage grew by 20.2% in FY 2024, while International tonnage grew by 3.7%.
• Ancillary Products and Services: Showed a strong growth of 20.9%, indicating successful diversification of revenue streams.
• 6E Eats: On-board service was simplified and revamped to include greater value, service efficiency, and sustainability.

Geographic Distribution and Market Penetration #

• Domestic: IndiGo operates in 88 domestic destinations.
• International: IndiGo serves 33 international destinations.
• New Destinations: 10 new domestic and 7 new international destinations were added in FY 2024.
• International Expansion: International capacity (ASK) is projected to reach towards 30% in the coming years, showing a strategic focus on internationalization.
• Codeshare agreement with Turkish Airlines to 37 European destinations and 5 destinations in the US.
• Damp lease with two B777 from Turkish Airlines.
• Codeshare agreement with Quantas to 7 destinations in Australia.

Operational Efficiency Metrics #

• Available Seat Kilometers (ASK): Increased by 21.8% to 139,281 million.
• Revenue Passenger Kilometers (RPK): Increased by 27.5% to 119,703 million.
• Passenger Load Factor: Increased by 3.8 percentage points to 85.9%.
• Number of Passengers: Increased by 24.7% to 106,728 thousand.
• Departures: Increased by 17% to 697,500.
• Fleet Size: Increased by 20.7% to 367 aircraft.
• On Time Performance: 81.3%, impacted by bad weather.
• Technical Dispatch Reliability: Maintained at 99.9%.
• Fuel Efficiency: 78% of fleet has Airbus A320neo aircrafts, 15% more fuel efficient than Airbus predecessors.
• CO2 Reduction: 19% per available seat kilometer between FY2024 and FY2016

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Fleet Expansion: A significant order book of 985 aircraft and the recent order for 30 Firm A350-900 aircraft is in place to support future growth, targeting a 600+ aircraft fleet by 2030.
  • Network Expansion: Continuous addition of new domestic and international destinations.
  • Internationalization: Strategic partnerships with eight international airlines and expansion into new international markets.
  • Digital Transformation: Implementation of innovations like 6Eskai (AI conversational direct channel) and upgrades to the Passenger Services System (PSS).
  • New Business Product: Launch a tailor-made business product in India
  • Customer Loyalty Program: Development of a loyalty program to enhance customer retention.
  • IndiGo Ventures: Engagement with the startup ecosystem to access disruptive technologies.
• Challenges:
  • Operational Disruptions: Supply-chain issues impacting spare engine availability.
  • Fuel Price Volatility: Exposure to fluctuations in fuel prices.
  • Foreign Exchange Risk: Exposure to adverse movements in foreign exchange rates, impacting costs.
  • Environmental Regulations: Compliance with evolving environmental regulations including emissions standards and noise reduction.
  • IROPS: The impact of bad weather, fog, stretching beyond Northern India and impacting operations.

Risk Framework #

Strategic Risks #

• Severity: High, due to the potential impact on the Company’s long-term growth plans, including expansion into new markets and the introduction of wide-body aircraft (A350-900 order).
• Likelihood: Medium. Market under-penetration in India presents growth opportunities, but competition and global economic factors introduce uncertainties.
• Trend: Increasing. IndiGo’s strategy of ‘Towards new heights and across new frontiers’ and plans to double in size by 2030, signals an increasing focus on strategic risk management. Also, the stated entry into the widebody space represents a change.
• Mitigation Strategies: Diversification of routes (domestic and international), strategic partnerships (codeshare agreements with Turkish Airlines, Qantas), fleet expansion, and investment in technology and customer experience.
• Control Effectiveness: Partially effective, as evidenced by a 26.6% growth in revenue from operations and a positive profit after tax. However, the stated tailwinds in OTP in the bad weather months demonstrate a partial effectiveness.
• Potential Financial Impact: Significant. IndiGo’s highest-ever annual total income of ₹712 billion and a net profit of ₹82 billion are directly tied to its strategic decisions.

Operational Risks #

• Severity: High. Supply-chain issues impacting the availability of spare engines for NEO P&W GTF-powered aircraft are directly impacting operations.
• Likelihood: High. Engine issues are ongoing, and “fog” weather are explicitly mentioned as a factor, combined with high aircraft utilization, shows a operational performance impact.
• Trend: Stable to Increasing. Ongoing supply chain constraints, and a growing fleet (adding more than one aircraft every week in FY2025), indicating a need for enhanced operational risk management.
• Mitigation Strategies: Lease extensions, damp leases, induction of used aircraft, and close collaboration with OEMs and engine manufacturers. Operational Standard Operating Procedures (SOPs) reviews and evolving of digital solutions are in place.
• Control Effectiveness: Mixed. Operational performance resulted to 107 million customers, a 25% growth vs. FY 2023. IndiGo was able to maintain technical dispatch reliability of 99.9%. Despite the challenges, they achieved six quarters of consecutive profitability. OTP was negatively impacted during IROPS.
• Potential Financial Impact: High. Operational disruptions can lead to flight cancellations, passenger compensation, and reputational damage, potentially leading to material financial impact.

Financial Risks #

• Severity: Medium to High. Significant exposure to fuel price volatility and foreign exchange rate fluctuations, with a considerable portion of costs denominated in foreign currency.
• Likelihood: High. Fuel prices and foreign exchange rates are inherently volatile.
• Trend: Decreasing. Foreign exchange losses decreased from ₹29,597.73 million in FY 2023 to ₹7,173.97 million in FY 2024. CASK ex-fuel decreased by 3.6%.
• Mitigation Strategies: Fleet renewal with fuel-efficient aircraft (78% of the fleet is A320neo and A321neo), operational efficiencies (single-engine taxi, optimized flight paths), natural hedging through increased international operations, and financial hedging instruments.
• Control Effectiveness: Partially Effective. The Company reported a net profit of ₹81,724.68 million in FY 2024 compared to a net loss in FY 2023. RASK increased by 3.2%, and CASK decreased by 9.3%.
• Potential Financial Impact: High. Aircraft fuel expenses increased by 1.1% from FY 2023 to FY 2024, primarily due to a decrease in ATF prices.

Compliance/Regulatory Risks #

• Severity: Medium to High. The aviation industry is highly regulated, and changes in regulations or non-compliance can have significant financial and operational consequences.
• Likelihood: Medium. Regulatory changes are common in the aviation industry, and the Company has experienced some non-compliance issues in the past.
• Trend: Stable. Ongoing monitoring and engagement with regulatory authorities.
• Mitigation Strategies: Close communication with regulatory authorities (MoCA, BCAS, DGCA, AAI, AERA), participation in industry forums (FIA), and internal compliance programs.
• Control Effectiveness: Generally effective. The Company ensures timely compliance and keeps itself abreast of all regulatory changes. The Company’s Code of Conduct. Also, in place, is an ethics survey, the whistleblower policy and the ethics ambassador programs.
• Potential Financial Impact: Medium to High. Fines, penalties, and operational restrictions due to non-compliance can have a material impact. A penalty was imposed by DGCA during the analyzed period.

Emerging Risks #

• Severity: Medium to high. The aviation sector faces ESG risks that may require airlines to invest in modern generation aircraft, and use blends of sustainable aviation fuel (SAF).
• Likelihood: Medium. IndiGo recognizes the limited availability of SAF, and uncertainty in sufficient and feasible supply.
• Trend: Increasing. The BRSR report is evidence of an increasing trend.
• Mitigation Strategies: IndiGo has reduced emissions by 19% vs. FY 2016. The adoption of innovative nozzles can reduce on-board water consumption by 98%. 100% fleet of eco-friendly electric coaches in Ahmedabad.
• Control Effectiveness: Partially effective. IndiGo is in discussions with oil marketing companies regarding SAF. Also, 86% of the fleet is compliant with Chapter 14 noise standards set by ICAO.
• Potential Financial Impact. Medium to high. SAF may be available at a significantly higher cost.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• The Group is executing a strategy ‘Towards new heights and across new frontiers’ with pillars of Reassure, Develop, and Create, aiming to double in size by 2030 and become a global aviation player.
• Secured a steady aircraft flow until the mid-next decade with an order of 985 aircraft and an additional order for 30 Firm A350-900 aircraft in April 2024, with deliveries starting 2027.
• International expansion is a key focus, with the international capacity (ASK) share projected to reach towards 30% in the coming years.
• Plans to launch a tailor-made business product on the busiest routes.

Competitive Advantages and Market Positioning #

• IndiGo is the largest airline in India and 7th largest globally by daily departures.
• Maintains a cost leadership position, with a CASK ex-fuel of INR 2.66 for FY 2024.
• Operates a young, fuel-efficient fleet (average age 4.4 years as of FY2024) comprised of a high proportion of Airbus A320neo family aircraft (78%).
• Offers an unparalleled network, with over 2,000 daily flights across 121 destinations.
• Maintained a high passenger load factor of 85.9% in FY 2024.
• Strengthened international connectivity through codeshare agreements with Turkish Airlines and Qantas.

Innovation Initiatives and R&D Effectiveness #

• Implemented AI-powered solutions like ‘6Eskai’ that uses GPT-4 to enhance customer experience and reduce customer service workload.
• Undertook a comprehensive upgrade of its Passenger Services System (PSS).
• Continously executes measures for CO2 reduction, including single engine taxi, optimised landing and take-off.
• Implementing Flight Operations measures to increase safety and operational efficency.
• Digitised core airline processes with the Baggage Reconciliation System, an app for crew logistics, Ground Support Equipment (GSE) automation, and implementing INFORM for manpower planning.

Management’s Track Record in Execution #

• Achieved six consecutive quarters of profitability from Q3 FY 2023 to the end of FY 2024.
• Reported the highest-ever annual total income of approximately ₹712 billion (+27%) and a net profit of approximately ₹82 billion in FY 2024.
• Became net worth positive again on December 31, 2023.
• Achieved milestones of 100 million customers in a single year, flying to 115 destinations, and operating 2,000 daily flights in FY 2024.

Capital Allocation Strategy #

• Prioritized investments to modernizing its fleet and expanding its route network.
• Disciplined approach to liquidity management.
• Total cash increased by 48.3% to ₹347,375.29 million as of March 31, 2024.

Organizational Changes and Their Impact #

• Opened new corporate headquarters in Gurugram to consolidate teams and boost productivity.
• Launched ‘6E Embrace’, a DEI strategy, with initiatives like inclusive hiring and employee integration programs, increasing employees with disabilities to around 200.
• Introduced ‘6E Breez’, an employee super app, to digitize and expand the reach of engagement programs.
• Implemented leadership development programs, targeting digital acumen, growth, culture, and managerial skills.
• Implemented a change in leadership for company secretary, and chief compliance officer.

ESG Analysis of InterGlobe Aviation Limited (IndiGo) - FY2023-24 #

Environmental Metrics and Targets #

• Fleet Efficiency: 78% of IndiGo’s fleet comprises Airbus A320neo aircraft, contributing to a 19% reduction in CO2 emissions per available seat kilometer between FY2016 and FY2024.
• Fuel Consumption: Aircraft fuel expenses increased by only 1.1% in FY2024, despite a 21.8% increase in capacity, indicating improved fuel efficiency in terms of CASK.
• CO2 Reduction Achievements:
  • 44,128 tonnes of carbon emission reduction were achieved through CDR and redispatch techniques.
  • 2,131 tonnes of carbon emission reduction by optimising overseas routes.
  • 66,000 tonnes through single engine taxiing, descent profile optimisation, reduced flap take off and landing, and focused fuel uplift.
• Operational Efficiency: Initiatives include single engine taxi, optimised landing and take-off, descent profile optimisation, weight reduction, and electronic flight bags. 86% of fleet meet the Chapter XIV noise standards of ICAO.
• Ground Operations: Prioritizing electric vehicles (EVs) for ground operations, resulting in the avoidance of carbon emissions equivalent to 50,000 metric tonnes, a 66% increase in efficiency over the previous year. Ahmedabad station has a 100% fleet of electric coaches.
• Waste Management Initiatives: Eliminated single-use plastic for more than 100 million products.
• Environmental Performance: Discloses environmental performance in compliance with the SEBI circular Annexure I-Format of BRSR Core with assurance from an independent external third party.

Social Responsibility Programs #

• Women Empowerment: Programs aimed at increasing income by 20-25% for 41,000 women and 1,000 transgender individuals.
• Environment: Clean Development Mechanism (CDM) technologies are adopted and the use of biogas technology has led to a 55.11% reduction in fuelwood consumption.
• Heritage Conservation: Support for conservation of historically significant monuments.
• Children and Education: Programs impacting 13,500 children, focusing on digital literacy, science labs, libraries, and WASH facilities in government schools.
• Employee Volunteering: Active in blood donation drives, senior citizen care, tree plantation, and mentorship programs.
• CSR Spend: Spent 19,279,833 on CSR projects. Administrative overhead spent for CSR amounts to Rs. 531,353.

Governance Structure and Effectiveness #

• Board Composition: Comprises eight members, with an appropriate mix of Non-Executive, Executive, and Independent Directors, ensuring compliance with the Companies Act, 2013 and SEBI LODR Regulations.
• Board Committees: Five committees (Audit, Nomination and Remuneration, Risk Management, Corporate Social Responsibility, Stakeholders Relationship) oversee various governance aspects.
• Whistleblower Policy: A comprehensive mechanism, including a toll-free hotline, web portal, email, chatbot, and mail, is in place for reporting unethical behavior.
• Ethics and Compliance: The “6E Ethics Week” and “6E Code” underscore the Company’s commitment to ethical conduct and compliance with laws and regulations.
• Risk Management: Has a Risk Management Policy and Enterprise Risk Management (ERM) framework, regularly identifying and mitigating potential risks.

Sustainability Investments and ROI #

• Fleet Renewal: Substantial investment in Airbus A320neo family aircraft, resulting in 15% increased fuel efficiency and lower CO2 emissions.
• Operational Efficiency Measures: Investment in processes like single-engine taxiing, optimized flight profiles, and weight reduction measures has led to lower fuel consumption.
• Electrification Strategy: Investment in electric vehicles (EVs) for ground operations, contributing to significant carbon emission avoidance.

Regulatory Compliance and Future Preparations #

• Compliance: Complies with all requirements of the Stock Exchanges, SEBI, and other statutory authorities.
• Secretarial Standards: Compliance with Secretarial Standards SS-1 and SS-2.
• Future Regulations: Monitoring regulatory changes, including CORSIA (Carbon Offset and Reduction Scheme for International Aviation) applicable from 2027, and potential mandates for SAF use. Preparing for compliance with future environmental standards by investing in new technologies and sustainable practices.
• Data Security Compliance: Building a solid, future ready, digital foundation, by undertaking a comprehensive version upgrade of Passenger Services System (PSS) and has commenced setting up Modern Data Platform (Enterprise Data Hub)

Forward Outlook #

Future Projections and Guidance #

Segment-Wise Financial Analysis: Air Transportation Services #

Management Guidance and Assumptions #

• Management has determined the entire operation constitutes a single reportable segment: air transportation services.
• The Chief Operating Decision Maker (CODM), the Board of Directors, evaluates performance at an overall company level.
• Revenue recognition follows the “flown basis”, i.e., when the service is rendered.
• Management assumes that all the contracts will be completed, conditions will be satisfied and revenue recognized.
• The company is in the process of setting up audit trail feature for direct changes to the SAP database, which is managed and hosted by a 3rd party

Market Growth Forecasts #

• India is expected to remain the fastest-growing major economy, with a 6.8% growth estimated for FY 2025.
• India is projected to become the world’s third-largest economy by 2027.
• The Indian air passenger market, though the third-largest globally, is considered underpenetrated. Domestic seats per capita stood at 0.13, compared to 3.09 in the U.S, international seat per capita is 0.06 compared to the US 0.88 and UK 4.28 in 2023.
• India’s middle-class population is projected to reach 583 million by 2025, increasing disposable income for discretionary spending, including travel.
• More than 50% of Indian international air travelers are served by foreign airlines; however, the market share for Indian carriers has increased from ~39% in 2018 to ~44% in 2023.

Planned Strategic Initiatives #

• IndiGo plans to launch a tailor-made business product on the busiest and business routes.
• IndiGo aims to double its scale by the end of the decade, supported by a large outstanding order book of around 980 aircraft, including longer-range A321XLRs and A350-900 aircraft.
• Continued focus on domestic market expansion with new destinations.
• International expansion is a key focus, leveraging the domestic network and partnerships with eight international airlines to serve 49 international destinations.
• Digitisation of operations, including the adoption of AI tools and predictive maintenance technologies.
• Continued investment is to be made in electric vehicles (EVs) and eco-friendly ground equipment.
• Adoption of Sustainable Aviation Fuel (SAF) is a target, contingent on global availability and feasibility.

Capital Expenditure Plans #

• Investments in modernising the fleet with fuel-efficient aircraft, such as the Airbus A320neo and A321neo family. As of FY2024, 78% of fleet is Airbus 320neo.
• IndiGo plans to add more than one aircraft per week in FY2025.
• IndiGo is poised to become a 600+ aircraft carrier by 2030.
• Further investments in technology and infrastructure to support growth.

Efficiency Improvement Targets #

• Continued efforts to reduce fuel consumption and CO2 emissions, with a 19% CO2 reduction per available seat kilometre achieved between FY 2016 and FY 2024.
• Optimization of fuel-related standard operating procedures (SOPs) such as single-engine taxiing and optimised flight paths.
• Continued to focus on cost leadership.
• Ongoing water consumption reduction and waste management initiatives, including the reduction of single-use plastics.

Potential Challenges and Opportunities #

• Challenges:
  • Supply chain issues impacting spare engine availability for NEO P&W GTF-powered aircraft.
  • Intense competition in the airline industry.
  • Fluctuations in fuel prices and adverse movements in foreign exchange rates.
  • Increased scrutiny and regulatory requirements around environmental sustainability, including potential costs for carbon offsetting and noise abatement measures.
  • The need to attract and retain highly skilled talent.
• Opportunities:
  • Underpenetrated Indian aviation market offers significant growth potential.
  • Growing middle class and increased disposable income in India.
  • Expansion into Tier 2 and Tier 3 cities.
  • The Government of India’s commitment to invest ₹1 trillion in airport infrastructure.
  • Increase connectivity to underserved and unserved countries.
  • Increasing market share in the international travel segment.
  • Potential for fuel efficiency gains through Sustainable Aviation Fuel (SAF).

Scenario Analysis and Sensitivity #

• Fuel Price Sensitivity: Aircraft fuel expenses represent a significant portion of total costs. Management continuously monitors the fuel prices for implementing fuel-efficient practices.
• Foreign Exchange Rate Sensitivity: Adverse movements in foreign exchange rates (particularly USD) can significantly impact profitability due to foreign currency-denominated costs (aircraft and engine lease rentals, maintenance, and insurance). The Group is partially hedged from foreign currency deposits. A 1% depreciation/appreciation of the Indian Rupee against the USD would impact profit/loss by Rs. 4,977.98 million.
• Interest Rate Sensitivity: A reasonably possible change of 0.50% in interest rates at the reporting date would have impacted profit/loss by approximately Rs. (299.57) to 299.57 million.
• Aircraft Maintenance Obligations Sensitivity: A 10% difference in the expected cost of maintenance could impact the provision by Rs. 2,253.33 million. A 1% change in the discount rate could impact the provision by Rs 250.87 to (211.82) million.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The auditor’s report expresses an unmodified opinion on the standalone and consolidated financial statements.
• No qualifications or adverse remarks were reported by the statutory auditors in the audit report.
• The audit report under “Report on Other Legal and Regulatory Requirements” states a minor issue with the SAP accounting software, noting that the audit trail feature is not enabled for direct changes to SAP database using certain access rights.

Key Accounting Policies and Changes #

• The financial statements comply with Indian Accounting Standards (Ind AS).
• During the quarter ended June 30, 2023, useful life of 14 CEO aircraft was changed from 20 years to 13-16 years, impacting depreciation.

Internal Control Effectiveness #

• The auditor’s report states that the Company maintained adequate internal financial controls, with reference to financial statements and such controls were operating effectively.
• The audit report mentions a deficiency where the accounting software’s audit trail feature is not enabled for direct changes to the SAP database.

Regulatory Compliance Status #

• The Company complied with applicable Secretarial Standards (SS-1 & SS-2).
• There have been delays/discrepancies in filing of certain forms/disclosures.
• The Company received a show cause notice from Directorate General of Civil Aviation (‘DGCA’) related to four tail strike incidents and complied by paying the revised penalty in November 2023.
• The company is in the process of appointing the nodal officer under the provisions of Investor Education and Protection Fund (‘IEPF’).

Legal Proceedings and Potential Impact #

• The Company is involved in various taxation disputes, including disallowances by the income tax authority and tax treatment of incentives. These are pending before various appellate authorities.
• There are legal proceedings related to Customs, Octroi, Service Tax, IGST, and VAT, with amounts not acknowledged as debt.
• The Company faces a penalty from CCI related to alleged cartelization, which is currently under appeal.
• There are ongoing appeals related to IGST on re-import of aircraft parts.

Related Party Transactions #

• The Company engaged in transactions with related parties, including Agile Airport Services Private Limited, InterGlobe Air Transport Limited, InterGlobe Hotels Private Limited, and others.
• Transactions included commission, crew accommodation, training, and other operational expenses.
• Outstanding balances with related parties are disclosed, including receivables and payables.
• All the contracts with its related parties during FY 2024, were in the ordinary course of business and on an arm’s length basis.

Analysis of Accounting Quality #

• The use of estimates and judgments is acknowledged, particularly in areas like lease accounting, maintenance provisions, and revenue recognition.
• Accrual basis of accounting is followed.

Regulatory Risk Assessment #

• The Company operates in a highly regulated industry, facing exposure to changes in aviation and tax regulations.
• The ongoing tax disputes and the CCI penalty indicate a level of regulatory risk, with potential financial implications if rulings are unfavorable.
• The Company’s compliance with labor laws and environmental regulations is mentioned, but specific details are limited.
• The matter pertaining to delay/discrepancies in filing of certain forms/disclosures indicates the regulatory risk assessment.