Troubles at IndiGo could add tailwinds to SpiceJet’s growth
After Jet Airways was grounded in April, SpiceJet has acquired most of its coveted metro routes.
In May, SpiceJet’s market share rose to 14.8 per cent from 13.1 per cent a month ago, while that of InterGlobe, the owner of Indigo, fell to 49 per cent from 50 per cent. The trend is expected to continue. After Jet Airways was grounded in April, SpiceJet has acquired most of its coveted metro routes and its benefit will be visible in the coming months.
The feud between the promoters of Indigo could last longer than expected with both having near equal holding in the company. Rahul Bhatia owns 38 per cent and Rakesh Gangwal owns 37 per cent. In case of SpiceJet, there is only one promoter – Ajay Singh who analysts view as an ambitious and aggressive individual. This along with SpiceJet’s higher estimated growth will prompt the street to give a higher weight to the second-largest carrier and lead to higher valuation multiples.
On Wednesday, InterGlobe Aviation’s stock nosedived by 10.8 per cent, while SpiceJet’s stock rose by 2.6 per cent. At these prices, InterGlobe’s enterprise value was 6.7 times the operating margin before depreciation and amortisation (EBIDTA). For Spice-Jet, it was 4.6 times.