IndiGo Shares Fall Over 2% After ₹1,546 Cr Q3 Hit From Disruptions, Labour Code Costs

Shares of InterGlobe Aviation, the parent company of IndiGo Airlines, declined over 2% on Friday, a day after the company reported its third-quarter earnings for the financial year 2025–26 (FY26). During the quarter, the company's net profit declined by 77.55% to ₹549.80 crore as massive flight disruption, penalties by the government and new labour code costs hit its bottom line by ₹1,546.5 crore.

The company said it took a hit of ₹969.3 crore from operational disruptions and ₹577.2 crore from other issues, including a DGCA penalty of ₹22.2 crore.

At 11 AM, InterGlobe Aviation shares were down 2.73% at ₹4,779.55 on the BSE.

Despite the impact, brokerages remain unfazed over the company's growth prospects as the quarter was a “decent show despite disruptions”.

They note revenue growth of 6% year-on-year to ₹23,470 crore, driven mainly by higher passenger revenue, which also grew 6%. Ancillary revenue increased 14% to ₹2,450 crore. Passenger revenue growth was supported by an 8% rise in RPK, partly offset by a 2% decline in passenger yields.

CASK (excluding fuel and forex) stood at ₹2.96, up 2% year-on-year. EBITDA increased 4% year-on-year to ₹5,360 crore, helped by lower forex losses compared to last year. Unrestricted cash fell to ₹36,900 crore from ₹38,500 crore in the previous quarter.

For the fourth quarter, the company expects PRASK growth in the mid-single digits, as last year had a high base due to the Kumbh.

Capacity growth was moderated due to operational disruptions. IndiGo reported 11% year-on-year growth in ASK to 4,540 crore during the quarter and expects 10% growth in 4QFY26, largely from international operations. The moderation reflects reduced capacity in the winter schedule.

As of 30 September 2025, IndiGo’s fleet stood at 417 aircraft, including A320 and A321 variants, ATR aircraft, freighters, and wide-body planes on damp lease. The airline added four Boeing 787 aircraft on damp lease in Q2 and plans to induct more in the coming months.

Costs are expected to rise due to a weaker rupee and slower capacity growth. CASK (excluding fuel and forex) increased in Q3 due to annual contract escalations, higher dollar-linked costs, and higher fixed costs per ASK. Management expects mid-single-digit CASK growth in FY26.

To manage rising costs, IndiGo plans to hedge its foreign exchange exposure by scaling up hedging to $3 billion, investing $820 million in GIFT City for aviation asset acquisition, and expanding international operations to create a natural hedge against the dollar.

What Brokerages Said

JM Financial has cut its earnings estimates for the company by 52% for FY26, 6% for FY27 and 3% for FY28, citing a weaker rupee and pressure on near-term earnings. However, it believes the stock has already corrected sharply after recent operational disruptions.

The brokerage values the stock at its long-term average P/E of 20x, sets a target price of ₹5,420 (around 10% upside), and has upgraded the stock from Reduce to Add.

Motilal Oswal Financial Services said that over the longer term, the return of grounded aircraft and improving demand should support growth. It expects revenue, EBITDAR and adjusted profit to grow at a CAGR of 12%, 13% and 10%, respectively, between FY25 and FY28.

The brokerage values the stock at 9x FY28E EBITDAR, with a target price of ₹6,100, and has reiterated its Buy rating.