IndiGo won't crash despite turbulence; no long-term damage, but not a 'buy' yet: Mayuresh Joshi

Interglobe Aviation, the parent company of Indigo, is currently navigating significant operational headwinds, leading to negative market sentiment. The airline has reportedly sought a three-month exemption from the Directorate General of Civil Aviation (DGCA) for new pilot rostering norms, requesting time until February 10 to align its crew management systems. This request, which the DGCA has not yet approved, comes amidst ongoing flight disruptions.

Brokerage houses have offered mixed views on the stock. Citi has maintained a 'buy' call with a target price of ₹6,500, noting that while the new norms will reduce rostering flexibility and normalization may take time, its long-term view remains positive. In contrast, Morgan Stanley, while retaining an 'overweight' rating, has trimmed its target price. More significantly, it has cut its earnings per share (EPS) estimates for FY27 and FY28 by 20%, citing an expected rise in the cost of average seat kilometre due to the need to hire more pilots and crew, which could cap earnings growth.

Speaking on the matter in an interview with CNBC TV18, market expert Mayuresh Joshi, Head of Equity Research, William O’Neil India, expressed a nuanced view, stating that a structural decline for the airline seems improbable. He outlined two primary reasons for his assessment. "Indigo still controls a majority in terms of the fleets and sky operations, so the market share is relatively huge," he explained. He pointed out that competition remains scarce, with Air India, Vistara, and a capacity-limited SpiceJet being the only other significant players. "On the domestic scene, it still continues to rule the skies," Joshi added.

Furthermore, he highlighted that Indigo is continuously adding new routes, both domestically and internationally, which are typically more margin-accretive. While acknowledging that the new regulations will have some impact on earnings, Joshi believes the company's market dominance and high passenger load factors—bolstered by a lack of alternatives for flyers—will prevent a long-term structural downturn. His final word on Indigo was cautious: "Not a buy at this juncture, but we also don't see a structural decline."

Shifting focus to the hospitality sector, Joshi shared a bullish outlook on ITC Hotels, particularly in light of a recent block deal involving 18 crore shares. He disclosed that the stock remains a holding in his local and global portfolios. He sees significant growth potential for the entire organised hospitality industry, which currently represents a small fraction of the total market.

Mayuresh cited several factors supporting his positive stance, including the strategic initiatives of major hotel players, the consistency of average room rates, and the benefits from GST rationalisation on rooms priced below ₹7,500. He also emphasised the importance of the food and beverage (F&B) and MICE (Meetings, Incentives, Conferences, and Exhibitions) segments, which contribute to maintaining high-margin levels. "We continue liking this space," he concluded.