IndiGo's share price witnessed a significant decline during early trading on the Bombay Stock Exchange (BSE) this Friday, January 23, following the release of the airline's third-quarter financial results. The stock of InterGlobe Aviation, which operates IndiGo, opened at ₹4,840.10, notably lower than its previous closing price of ₹4,913.80. It experienced a sharp intraday drop of 3.9%, reaching a low of ₹4,723.60. However, the aviation stock demonstrated some resilience by quickly recovering a portion of these losses, trading approximately 1.75% lower at ₹4,827.85 around 9:20 AM.
IndiGo Q3 Financial Performance: A Deep Dive
The company disclosed its consolidated financial results for the third quarter of fiscal year 2026 on Thursday, January 22. The report revealed a substantial 77.55% year-on-year decline in consolidated profit, which stood at ₹5,498 million. This dramatic fall was primarily attributed to two significant factors: a one-time impact of ₹9,693 million resulting from the implementation of new labour regulations and an exceptional item totaling ₹5,772 million related to operational disruptions.
Despite the profit plunge, there were some positive indicators in the quarterly report. Consolidated revenue from operations showed a modest increase of 6.2% year-on-year, reaching ₹2,34,719 million. However, the EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent) metric experienced a slight contraction of 0.8% YoY, settling at ₹60,084 million.
Operational metrics presented a mixed picture. The airline's capacity expanded by 11.2% to 45.4 billion in Q3FY26, indicating continued growth in its service offerings. Conversely, the number of passengers carried saw a more modest increase of 2.8%, totaling 31.9 million for the quarter.
Analyst Perspectives: Should Investors Consider Buying IndiGo Shares?
Despite the immediate negative market reaction, several leading brokerage firms have maintained an optimistic outlook on IndiGo's long-term prospects. Their analyses suggest that the current dip might present a potential buying opportunity for investors with a longer investment horizon.
Emkay Global Financial Services: Maintaining Buy Rating
Emkay Global Financial Services has reaffirmed its buy recommendation on IndiGo shares, setting a target price of ₹6,300. The brokerage anticipates a gradual improvement in the airline's operational performance and overall growth trajectory. "We value Indigo at a P/E-based target price of ₹6,300, which is approximately 22 times the estimated earnings per share for December 2027. While the company stands to benefit from accumulated tax losses until FY28, we have adjusted the profit after tax to reflect normalized taxation levels," stated Emkay in its research note.
The firm also highlighted potential risks, including adverse currency fluctuations, volatile fuel prices, an economic slowdown, possible stake sales, and operational challenges. Emkay revised its EBITDA estimate for FY26 downward by 5% but kept projections for FY27 and FY28 unchanged. However, it noted that adjusted earnings per share (excluding foreign exchange impacts and exceptional items) are now forecasted to be 10%, 6%, and 7% lower for FY26, FY27, and FY28, respectively, due to adjustments below the operating line.
Motilal Oswal Financial Services: Confidence in Growth Strategy
Motilal Oswal Financial Services has also maintained a buy call on IndiGo, with a slightly lower target price of ₹6,100. The brokerage pointed out that despite near-term obstacles such as reduced capacity, capped pricing power, rupee depreciation, and increasing damp lease costs, IndiGo remains confident in its strategic growth plan. "India's robust domestic network continues to serve as the foundation for IndiGo's operations, complemented by its expanding international connectivity," Motilal Oswal emphasized.
Looking ahead, the brokerage expects performance improvements in upcoming quarters, driven by the return of grounded aircraft to service and enhanced demand. "We project that the company's revenue, EBITDAR, and adjusted profit after tax will achieve compound annual growth rates of 12%, 13%, and 10%, respectively, over the period from FY25 to FY28. Our target price of ₹6,100 is derived by valuing the stock at 9 times the estimated EBITDAR for FY28," the firm elaborated.
The contrasting immediate market reaction and analyst optimism underscore the complex dynamics at play in the aviation sector and equity markets. Investors are advised to conduct thorough research and consider their individual risk tolerance and investment goals before making any decisions regarding IndiGo shares.
