InterGlobe Aviation shares fall 25% since December, here is why the stock is under pressure

Shares of the country’s largest airline operator - IndiGo – have been witnessing selling pressure since December last year. The stock has fallen 25% from its December 1, closing price of ₹ 5,794 to hit an intraday low of ₹4,325 on Monday, April 13.

In intraday deals, InterGlobe Aviation fell as much as 5% after crude price surged above $100 per barrel after United States and Iran failed to reach an agreement on ceasefire talks over the weekend. On the BSE, InterGlobe Aviation shares dropped as much as 6.36% to touch an intraday low of ₹4,265.60.

Crude oil prices in the global market surged past $102 per barrel (bbl) during the early market hours on Monday after US President Donald Trump disclosed that the US-Iran talks have failed over the weekend and the United States is planning to blockade the marine traffic at Strait of Hormuz.

On Sunday, April 12, US President Donald Trump said that after a 20-hour meeting with Iran, the negotiations have failed to come to any conclusion as the Iranian authorities are ‘unwilling to give up its nuclear ambitions’ as the conflict entered the seventh week since its beginning on February 28.

Meanwhile, the government over the weekend hiked the windfall tax to ₹42 a litre on aviation fuel from an earlier ₹29.5 a litre. The government had, on March 26, imposed an export duty of ₹21.50 a litre on diesel and ₹29.50 a litre on ATF. The duties were levied to increase domestic availability of the fuel amid the war in West Asia.

IndiGo shares have been on a downward spiral since December last year after it faced flight cancellations due to operational disruptions. The problems for the country's largest airline exacerbated in March after geopolitical tensions emerged in West Asia that led to spike in crude oil price and flight cancellations.

The company in the third quarter of previous financial year reported a net profit of ₹550 crore down 77% form ₹2,449 crore in the same period last year. The sharp decline in profit came on account of exceptional expense of ₹1,546 crore in October-December period.

IndiGo reported stable operational performance as its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) also known as operating profit advanced 4% to ₹5,367 crore but its EBITDA margin contracted by 60 basis points to 22.9%.

IndiGo revises fuel charges

IndiGo had earlier this month revised its fuel charges ranging from ₹275 to ₹10,000, which had pushed airfares higher for many domestic and international flights amid the rise in jet fuel prices.

"Although fully offsetting the fuel price increase would require substantial fare revisions, IndiGo has passed on a relatively smaller amount to customers, keeping in mind the consequential burden on them," IndiGo had said, and regretted the inconvenience to passengers resulting from the fuel charges.

For domestic flights, the revised fuel charges will be ₹275 to ₹950, and in the case of international flights, the fuel charges will vary from ₹900 to ₹10,000. The charges, which will depend on the distance, will be applicable from 0001 hours on April 2.

As of 9:41 am, IndiGo shares traded 3% lower at ₹4,416, underperforming the NIFTY50 index which was down 1.71%. The stock was among the top five losers in the NIFTY50 index, data from NSE showed.