IndiGo reports highest profit, board meet continues amid promoters' tussle

IndiGo CEO Ronojoy Dutta
In the midst of a tussle between promoters, InterGlobe Aviation, which operates the country’s largest airline by market share IndiGo, has recorded its highest net profit at Rs 1,203 crore for the June quarter with a more than 40-fold rise from the same period last year.    

That’s not the only first for the company. In a departure from the regular practice, the company’s board meeting has been stretched to two days. The board on Friday discussed a “range of issues”, including appointment of a woman director, and the meeting will continue on Saturday, IndiGo Chief Executive Officer Ronojoy Dutta said.

Along with the appointment of women directors, the board’s size will also be expanded to 12 directors from the current six. In the new board, Rahul Bhatia’s InterGlobe Enterprises (IGE) will have the right to nominate six directors and Rakesh Gangwal will nominate two. In addition, there will be four independent directors.

The company is learnt to have approached Indra Nooyi, former CEO of beverage giant Pepsico, and Neelam Dhawan, former India head of HP, for board appointment.

In the post-results analyst call on Friday, foreign portfolio investors grilled  Dutta over why the findings of the EY audit report have not been shared with shareholders. Co-promoter Rakesh Gangwal had earlier said the report meant to check the legality of the related party transactions of the company had not been shared with board members. “We request the company to share the EY report with the shareholders. It would give us clarity,” said Avinash Vazirani, Fund Manager (Emerging Markets) at Jupiter Capital.

While IndiGo’s net profit has soared to Rs 1,203 crore during the April-June quarter from Rs 27 crore in the corresponding period last year, its revenue rose 45 per cent to Rs 9,420 crore on the back of strong passenger revenues and a sharp improvement in cargo performance.

CEO Dutta attributed the rise primarily to the vacuum created by Jet Airways, offering IndiGo the scope to increase its fare and yield. He however warned that moving forward, this kind of bumper profit may not be sustainable. “The situation in the second quarter, which is the toughest for airlines in India, will definitely improve compared to last year but how much it would improve is yet to be determined,” Dutta said.

Sales jumped 42 per cent in the June quarter to Rs 9,420 crore from the comparable period a year ago. IndiGo’s sales and market share have been steadily increasing in the recent past even as rival Jet Airways got grounded in April due to severe liquidity crunch.

Revenue per available seat kilometre — a metric which shows how much the airline earns by operating one seat for one kilometre, rose 10.7 per cent to Rs 4.10 while yield per kilometer rose 13 per cent to Rs 4.08. Cost per available seat kilometer reduced by 6.3 per cent.

As of June end, IndiGo had cash reserves of Rs 17,337 crore. As a result of an accounting standard change, IndiGo's debt is pegged at Rs 18,430 crore. In the account books, this reflected in a decline in rental expenses and an increase in finance and depreciation costs. 

The dispute between IndiGo founder Rahul Bhatia and his estranged partner Rakesh Gangwal, however, comes as a distraction to its managers at a time when carriers are competing to fill the gap left by bankrupt Jet Airways. Analysts pointed out that if the dispute is not settled quickly, it may dent investor confidence, delay decisions on key issues, invite avoidable regulatory attention and force the carrier to cede space to rivals.