CRISIL Assigns ‘AA-/Stable/CRISIL A1+’ rating to IndiGo
IndiGo has a total order book of around 960 aircraft as of March 2024, to be delivered by 2035
CRISIL Ratings has assigned its ‘CRISIL AA-/Stable/CRISIL A1+’ ratings to the bank facilities of InterGlobe Aviation Limited (IndiGo).
The ratings factor in the strong and established market position of the company in the Indian aviation sector with a market share of more than 60% in the domestic segment and around 18% in the country’s international passenger segment.
During the nine months of fiscal 2024, revenue grew 27% to Rs 51,079 crore on y-o-y basis, supported by strong passenger and capacity growth seen across IndiGo’s domestic and international network. During the same period, earnings before finance income and cost, tax, depreciation, amortisation and aircraft/engine rental (EBITDAR) margin improved to 25.5% against 13.4% for full fiscal 2023, owing to moderation in fuel costs, high passenger load factors (PLFs) and firm yields.
Holding up of yields owing to a tight demand-supply situation, along with planned fleet addition during fiscal 2025 and sustenance of passenger demand growth is expected to keep the operating performance healthy in the near term.
As of date, the number of aircraft that are grounded for the carrier are in the mid-70s due to an issue with powder metal contamination in the engines of these aircraft. However, the airline continues to engage with the original equipment manufacturer (OEM) and expects the number of groundings to remain range-bound and also expects steady deliveries of aircraft from its large orderbook, along with flexibility to extend expiring leases as well as take aircraft on new dry or damp operating leases from the secondary market. The mitigants being put in place by the company are expected to minimise the impact of groundings in the near term. Earlier, the company placed the largest ever single order of 500 aircraft during early fiscal 2024 and had a total order book of around 960 aircraft as of March 2024, to be delivered by 2035.
IndiGo’s financial risk profile, characterised by debt mainly consisting of capitalised lease obligations for its fleet, has seen improvement with the debt protection metrics strengthening during the second half of fiscal 2023 and first half of fiscal 2024, and are expected to improve further, on the back of strong cash accruals expected in the near to medium term. The financial risk profile is further boosted by the healthy unencumbered cash and equivalents maintained on the books (Rs 19,200 crore as on December 31, 2023), enabling it to maintain adequate liquidity to protect itself from adverse external events and yet continue with operations in a smooth manner, as well as additional financial flexibility from undrawn fund-based lines of Rs 4,700 crore as of December 2023.
The airline has a demonstrated track record of maintaining healthy liquidity on the books and we expect it to maintain adequate liquidity equivalent to at least six months of fixed operating expenses.
IndiGo has kept its focus on growth and on building a wide network, which has enabled it to command a domestic market share of around 62% for fiscal 2024, with the share growing consistently since 2007. In the international segment of Indian aviation as well, it has a market share of around 18% (out of the 43% share in this segment held by Indian carriers) for the same period. Further, the company has consistently expanded its fleet with the help of large orders
placed with the aircraft manufacturers and had a total fleet of 366 aircraft as of February 2024. Going forward, deliveries of aircraft against the current orderbook of 960 aircraft is expected to further strengthen the already robust market position of IndiGo.
