IndiGo to buy 10 A320 NEO aircraft from Airbus; stock surges

InterGlobe Aviation, the parent of India's largest domestic carrier IndiGo, today placed the order for 10 additional A320 NEO aircraft with Airbus. These 10 aircraft will be part of the original 300 aircraft order placed in 2019.

IndiGo's board of directors, at its meeting held today, also approved the incorporation of a wholly-owned subsidiary of the company; investment of up to ₹30 crore in one or more tranches; and issuing of corporate guarantees of up to $996 million to secure the payment obligations of said subsidiary.

The wholly owned subsidiary, Private Limited Company (to be incorporated), will work in the areas of financial services, with financing of aviation assets as its main objective. The indicative time for completion of the acquisition is three years.

IndiGo, in one of the biggest deals in the aviation space, in June announced to buy 500 Airbus A320 planes. IndiGo's order book comprises a mix of A320NEO, A321NEO, and A321XLR aircraft. With this new order, since its inception in 2006, IndiGo has ordered a massive total of 1,330 aircraft from French major Airbus.

The deal was announced months after IndiGo's rival airline Air India ordered 470 aircraft from Boeing and Airbus for $80 billion, with an option to purchase another 370 aircraft.

Reacting to the development, shares of InterGlobe Aviation Ltd closed 0.77% up at ₹2,455.70. The stock opened a gap up today at ₹2,447.05 and surged to an intra-day high of ₹2,473.95. The aviation stock is currently trading below a 52-week-high of ₹2,745.95 achieved on July 13, 2023, and its m-cap stands at ₹94,781.28 crore.

IndiGo currently operates over 300 aircraft and has previous orders totalling 480 aircraft, which are yet to be delivered. With this additional order of 500 aircraft for 2030-2035, IndiGo's order book has almost 1,000 aircraft yet to be delivered well into the next decade. The airline's domestic market share stood at 61.4% in May.

InterGlobe Aviation's April to June quarter profit had surged 390.4% to ₹3,090.6 crore against ₹1,064.3 crore in the same period last year, while its revenue rose 29.8% to ₹16,683 crore against ₹12,855.2 crore in the year-ago period. The airline's EBITDA (earnings before income, tax, depreciation, and amortisation) stood at ₹5,210.9 crore, surging 626.8% against ₹716.9 crore in the year-ago period. The EBITDA margin expanded to 31.2% in the June quarter as against 5.6% in the same period last year.

Separately, the Gangwal family led by Indigo promoter Rakesh Gangwal may be looking at offloading around 4% stake in the low-cost airline to raise around ₹3,735 crore through the transaction. The family owned a 29.72% stake in IndiGo Airlines as of June 30, 2023.