IndiGo climbs 6% on clarification over ED summons

NEW DELHI: Shares of InterGlobe Aviation climbed nearly 6 per cent in the early trade on Thursday.

The stock soared after the company clarified that it did not get any summons from the Enforcement Directorate (ED).

The stock had nosedived 9 per cent in the previous session amid reports that the ED had summoned Indigo’s senior executives for violation of the Foreign Exchange Management Act (FEMA).


This apart, investor sentiment also took a hit after foreign brokerage Citi trimmed its target share price for the airline and assigned 'sell' rating on the stock.

“We rate IndiGo shares as sell. While the company continues to dominate the Indian airspace in terms of share in traffic, there are clear headwinds to margins, which drive our negative view on the stock,” Arvind Sharma wrote on Wednesday in a Citi Research note, trimming the target stock price to Rs 1,070 from Rs 1,240 earlier.

“The sharp increase in crude prices and the resultant uptick in ATF (Aviation Turbine Fuel) prices necessitates an increase in fares to offset the negative impact on profits. However, recent trends suggest that pricing power in the Indian aviation sector is low and IndiGo has been unable to pass on the cost pressures to customers in form of fare hikes," the note added.

The company reported a 73 per cent fall in its net profit at Rs 117.64 crore for the March quarter on costlier fuel, lower yields and aircraft groundings. It had logged Rs 440 crore profit in the year-ago period.

Revenue, however, grew 17.8 per cent from Rs 5,141.99 crore a year ago to Rs 6,056.84 crore in the latest quarter. Fuel cost during the quarter rose to Rs 2,338 crore from Rs 1,751 crore a year ago.

At 10:11 am, shares of the company were trading at Rs 1,164.45 apiece on BSE, up 2.49 per cent.