Shares of InterGlobe Aviation, the parent company of India's largest private airline IndiGo, rose nearly 1% in intraday trade on Monday amid a report that the airline is in talks with French aerospace major Airbus to lease 500 narrow-body A320 jets. The potential deal is expected to eclipse Air India's historical provisional purchase of 470 aircraft to Airbus in February this year.

Boosted by the development, IndiGo shares rose as much as 0.9% to ₹2,407.30, while the market capitalisation increased to ₹92,608 crore. Early today, the stock opened higher at ₹2,390 against the previous closing price of ₹2,386.7 on the BSE.

The aviation heavyweight is hovering around its 52-week high of ₹2,412 touched on May 30, 2023, while it has gained 59% against its 52-week low of ₹1,513.30 hit on June 20, 2022. The largecap stock has risen 32% in a year; 25% in six months; and 11% in a month. In the last one week, the counter has added 1.5%.

The potential deal is expected to be worth over $50 billion at the recent Airbus list prices but would be worth less than half this price after taking into consideration discounts for bulk deals.

IndiGo is one of Airbus’ largest customers and has ordered as many as 830 Airbus A320-family jets so far, of which around 500 are pending to be delivered. As of March 31, 2023, IndiGo had a fleet of 304 aircraft, including 21 A320 CEOs, 162 A320 NEOs, 79 A321 NEOs, 39 ATRs, 2 A321 freighters, and 1 B777. 

“A320 aircrafts are deployed on domestic and short mid-haul international routes (potential expansion areas; 6 international destinations have been added recently) and current order is in addition to the existing backlog of 500 aircrafts. Consistent delay in deliveries may have prompted Indigo to secure future pipeline well in advance,” says Jinesh Joshi – Research Analyst, Prabhudas Lilladher.

The brokerage has assigned “BUY” rating to the stock with a target price of ₹2,565, an upside potential of 6.5% from today’s high level.

Earlier in February this year, Air India, which was recently acquired by Tata Group, scripted history in the aviation space, with the biggest aircraft order of 540 aircraft from U.S. aircraft maker Boeing and French aerospace major Airbus. The deal includes Airbus' 250 aircrafts and 290 jets from Boeing. The first of the new aircraft will enter service in late-2023, with the bulk arriving from mid-2025 onwards.

IndiGo posted a profit after tax of ₹919.2 crore in the January-March quarter of 2023 against a loss of ₹1,681.8 crore in the same period last year. The revenue surged 76.5% year-on-year to ₹14,160.6 crore. The airline’s passenger ticket revenue grew 80.6% YoY to ₹12,434.6 crore, whereas ancillary revenues surged by 36.6% YoY to ₹1,445.9 crore. EBITDA (earnings before income, tax, depreciation and amortisation), during the quarter under review, stood at ₹2,966.5 crore vs ₹171.8 crore in the year-ago period.

For FY23, however, IndiGo's net loss stood at ₹305.8 crore and its revenue was at ₹54,446.5 crore vs ₹25,930.9 crore in FY22. EBITDA in FY23 stood at ₹7,311.6 crore against ₹1,148 crore in FY22. 

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