Indigo becomes first Indian airline to cross Rs 1 lakh crore marketcap; here's why

Interglobe Aviation, the operator of India's largest airline crossed the magical Rs 1 lakh crore market capitalisation mark on Wednesday after its stock rose over 4 per cent to hit record high of Rs 2,634.25 on the BSE.

IndiGo joined the Rs 1 lakh crore market cap club alongside companies like Dabur India, Varun Beverages, Indusland Bank, Vedanta and Tech Mahindra. Reliance is the most valuable company of the country with a total market capitalisation at Rs 17.11 lakh crore followed by TCS at Rs 11.76 lakh crore, HDFC Bank at Rs 9.37 lakh crore and ICICI Bank at Rs 6.55 lakh crore.

AK Prabhakar, Head of Research at IDBI Capital, said that Indigo is an outlier among all its competitors.

"Indigo is an outlier among all the other airlines. Valuation are very expensive at current levels but Indigo is an efficiently run airline," he said. 

Here is what led to IndiGo surpassing Rs 1 lakh crore market cap

Record number of planes ordered at Paris Air Show

By ordering 500 aircraft of Airbus A320NEO Family at the Paris Airshow, Indigo broke Air India's record order of 470 aircraft. The delivery for the order would take place between 2030 and 2035. The airline said that the fuel-efficient A320NEO Family aircraft will help it have ‘strong focus’ on lowering operating costs and achieving fuel efficiency.

Dominance in the aviation market

The low-cost carrier dominates the Indian skies and had a total market-share of 61.4 per cent for the month of May, as compared to 54.6 in January. It carried a total of 81.1 lakh passengers and was followed by Air India which had 9.4 per cent share of the aviation market carrying 12.44 lakh passengers. Vistara was the third on the list carrying 11.95 lakh travellers with a market share of 9 per cent. 

"With 61 per cent market share, Indigo has benefited from other companies fighting for revival such as Jet Airways and Go Air. The aviation industry is a two player market. Air India will take a long time to catch along with all the other players," Prabhakar said.

Rising passenger air traffic

The rise in air traffic, and a recovery to pre-covid levels is another reason for Indigo's rise. According to data from DGCA, India's domestic air traffic rose 36 per cent for May compared to the same month last year. A total of 1.32 crore passengers were served by domestic airlines in May while the air traffic rose 2.5 per cent from the April level of 1.29 crore passengers.

"Total passenger level has crossed the peak covid levels. The number of flights are not back to normal compared to the rising demand for air travel. This has helped IndiGo to gain significant market share among its competitors," Prabhakar added.

"A decline in crude oil prices is very important for the aviation industry. The capacity utilisation is very high and Indigo is run very efficiently," he said highlighting the contribution of rising air traffic to IndiGo's market share. 

In March, rating agency ICRA had given a 'stable' outlook for aviation in India and predicted a faster pick up for the industry during FY24. It also said that the industry might cross pre-pandemic levels.