Prabhudas Lilladher has reaffirmed a BUY rating on InterGlobe Aviation (IndiGo) with an upwardly revised target price of Rs 5,861, signaling a potential upside from its current market price of Rs 5,087. The optimism stems from a robust roadmap outlined during IndiGo’s recent analyst meet, which includes aggressive capacity expansion, a major international push, fleet modernization, and premium service upgrades. Despite macro headwinds such as supply chain delays and elevated operating costs, IndiGo’s strong execution, expanding fleet, and evolving revenue model place it in a favorable position to sustain long-term growth. With EBITDAR margins expected to remain above 23% through FY27, the stock remains a compelling play in India’s aviation sector.

Ambitious Capacity Expansion to Fuel Top-Line Growth

IndiGo has laid out a strategic plan to scale its operations substantially over the next 18–24 months. The airline plans to add more than one aircraft per week in FY26, continuing this pace through 2030. With a pipeline of 925 aircraft in its order book, the gross addition guidance aligns with an early double-digit growth in Available Seat Kilometers (ASKM) and passenger traffic.

In FY26, IndiGo is projected to expand to 14 new destinations while onboarding 3,000 new employees to support operational needs. These additions will cement IndiGo’s market leadership both in network breadth and cost efficiency.

International Strategy Gains Altitude

The carrier's global ambitions were a core highlight of the meet. IndiGo’s international ASKM share has climbed to 28% in FY25, following the launch of five new routes. The goal is to push this figure to 40% by FY30, powered by the induction of long-haul aircraft like the A321XLRs and A350s.

Deliveries for the A321XLRs are expected to begin in FY26, while A350s will start joining the fleet in FY28. These additions are instrumental in IndiGo’s planned foray into long-haul markets such as Europe, which could structurally shift revenue and margin trajectories in the coming years.

Premiumization Takes Off with Business Class Offerings

IndiGo’s shift from a pure low-cost model to a hybrid strategy is evident. By the end of 2025, over 40 aircraft will feature business-class cabins with 12 seats each, deployed across 12 metro routes. Premium fares are expected to be priced at 3x of economy rates, boosting yield and driving profitability without materially affecting the cost structure.

The move is already live on major routes such as Delhi–Mumbai and Delhi–Bangalore, with Delhi–Chennai scheduled to follow shortly.

Financials: Strong Margins Despite Elevated Fuel Costs

While EPS is expected to show a modest decline in FY26, a rebound is projected in FY27. EBITDAR margins remain healthy despite fuel price fluctuations and lease costs. The company has also demonstrated prudent capital allocation with a focus on cash flow preservation.

Fleet Strength and Operational Edge

As of February 2025, IndiGo operates 439 aircraft, with over 75% comprising new engine option (NEO) models. This provides fuel efficiency and maintenance cost advantages. The carrier also initiated its first damp lease B787 for the Delhi–Bangkok route, offering 56 premium seats—a significant upgrade compared to A321/320 configurations.

In terms of infrastructure, Navi Mumbai airport is expected to be operational within five months, creating a dual-airport model for Mumbai. Jewar airport, set to offer competitive VAT rates and lower fees, will further optimize costs.

Customer Loyalty and Technological Integration

IndiGo’s revamped loyalty program has registered 2 million new members in the last five months, positioning it as a key tool for customer retention and ancillary revenue. As fleet size increases, the company has internalized Maintenance, Repair & Overhaul (MRO) services, improving turnaround and cost efficiency.

Further, the airline's yield trajectory for Q4FY25E has improved, with management now expecting flat or marginally higher yields, compared to earlier expectations of low single-digit decline.

Valuation & Target Levels for Investors

IndiGo’s current valuation multiples remain reasonable relative to its growth trajectory:

P/E (FY26E): 24.1x

EV/EBITDAR (FY26E): 12.4x

RoE (FY26E): 64.6%

Target Price: Rs 5,861

Support Zone: Rs 4,800

Upside Potential: ~15%

Given IndiGo's sector dominance, premiumization pivot, and international scale-up, these metrics suggest a reasonable entry point for long-term investors.

Long Term Bullish Story: Full Throttle into the Future

With over 925 aircraft orders, aggressive international expansion, and a roadmap to becoming a hybrid carrier, IndiGo is navigating toward a more diversified and premium positioning in the global aviation ecosystem. Its continued investments in fleet, personnel, and customer experience suggest readiness to scale even as operating conditions remain complex.

Prabhudas Lilladher’s ‘BUY’ rating and revised target of Rs 5,861 are well-supported by robust execution, consistent profitability, and a long-term growth narrative that remains intact. For investors seeking a resilient, high-growth stock in the Indian transport and services sector, IndiGo deserves a close look.