Interglobe Aviation – Am Loving it …

Interglobe Aviation (˜Indigo”) is one of the best placed airlines to take some buy position under the current circumstances.

Investment Thesis: With the lock-down being removed gradually in the next few days, airlines would start to resume partial operations, if not all. This should give fillip to some airline companies.

Among the airline industry players, Indigo’s value proposition in terms of having more than 48% domestic market share + low-cost + strong cash flows + continuous profitability + optimal debt – makes it attractive.

With the collapse of Jet Airways, Spicejet reeling under huge debt, Wadias wanting to exit Go Airways and Government of India (“GoI”) wanting to sell our beloved maharaja, Air India – the only formidable player in the Indian aviation industry is Interglobe Aviation.

Price: The stock price closed at INR 1,012 per share on 16th April 2020, i.e. market capitalization of INR 38,954 crs. You may dip your toes at the current levels and you may follow it with gradual purchase as when there are stock price dips. Please note that one or two quarters would be dismal, hence there could be some further price correction.

When asked by one of my investors: Do you think the airline will survive the downturn though? She had been in conversation with the airline’s team members with respect to her company’s business deal, hence was closer to the ground reality

My thoughts:

1. There is going to be pain for sure amongst the airlines, less so for Indigo for reasons stated above.

2. The company overall is fundamentally strong with decent cash flows and minimal debt.

3. They have become too big to fail (blessing in disguise, perhaps)

4. Travel will be tempered, yes – for a few months!! But there is no other credible mode of transport!! Nobody is going back to trains once you have got used to air travel!! Any other mode is obviously too cumbersome!!

5. People typically have short term memories. Even after 9/11, Air-travel increased manifold in couple of years!!

Disclaimer: Please note that these are my personal views. While, I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014, all investors are advised to conduct their own independent research into individual stocks or industries before making any decision. In addition, investors are advised that past stock performance is not indicative of future price action.