Shares of InterGlobe Aviation, the parent company of IndiGo, rose as much as 5% on Monday before trimming some gains. At around 10:10 am, the stock was still trading higher at Rs 4,528, up 2.79% or Rs 123 on the National Stock Exchange (BSE).
The rally came despite IndiGo reporting a consolidated net loss of Rs 2,537 crore for the March quarter, compared with a profit of Rs 3,068 crore in the same period last year.
So why are investors cheering a loss-making quarter? The answer lies in what caused the loss and how the market is interpreting it.
A major part of IndiGo’s quarterly loss came from foreign exchange losses linked to the sharp depreciation of the rupee. The airline reported a massive forex hit during the quarter, which significantly impacted its bottom line.
Analysts believe this was largely an accounting and currency-related impact rather than a reflection of weakness in the airline’s core business.
Operationally, the picture was stronger than the headline profit number suggests.
Revenue from operations rose to Rs 22,438 crore, while capacity continued to expand despite disruptions linked to the West Asia conflict and higher fuel costs. The airline also maintained its dominant position in the domestic aviation market.
Investors are also focusing on IndiGo’s long-term growth plans rather than a single weak quarter. The airline recently approved a plan to deploy up to $450 million towards acquiring aircraft, engines and aviation assets, signalling continued confidence in future expansion.
Another factor supporting sentiment is the company’s aggressive international expansion strategy. IndiGo has been increasing overseas routes, adding destinations and expanding fleet capacity as it looks to strengthen its position beyond the domestic market.
Brokerages also remain largely constructive on the stock despite near-term pressures from fuel prices, currency volatility and geopolitical disruptions. Several analysts believe demand for air travel remains strong and expect earnings to improve once forex-related pressures ease.
In short, investors appear to be looking past the March-quarter loss and focusing on IndiGo’s market leadership, expansion plans and the belief that the biggest drag on earnings came from temporary external factors rather than a deterioration in demand.