MOSL: ANNUAL REPORT THREADBARE (ART) | INTERGLOBE AVIATION FY17-High dividend payout-Equity dilution continues

​ANNUAL REPORT THREADBARE (ART) | INTERGLOBE AVIATION FY17: High dividend payout; Equity dilution continues

INDIGO’s FY17 annual report highlights PBT declining 24% to INR21.4b due to weak operating performance. PBT was, however, supported by higher other income at INR7.9b, 37%of PBT). Further, deferred incentive recognized increased to INR5.3b (FY16:INR3.6b).Operating cash flow improved to INR37.7b (FY16: INR30.0b) due to rise in supplementary rent payables by INR8.3b and incentives on aircraft acquisition by INR7.1b. Sale (at INR6.1b) and lease back of aircraft acquired from IPO proceeds helped FCF to remain high at INR41.4b (FY16: INR28.5b). Dividend payout ratio remained high at 89.2% (FY16: 99.7%). In FY18, INDIGO raised INR25.3b by diluting 6% of the equity to pursue change in its business strategy to owning more aircraft. This could impact dividend payouts and return ratios. Net unhedged forex exposure was high at INR57.0b (1.5x of NW). Non-core assets at INR93.4b (2.4x of NW) led to RoCE of 21.4% despite high RoIC of 70.0%.

Declining yield, rising fuel costs impact EBITDA: INDIGO’s yield declined 10% to INR3.5 leading to fall in revenue per available seat kilometer (RASK); while, the load factor increased 100bps to 85%. Rising crude oil prices led to increase in aircraft fuel expenses to INR63.4b,34% of revenue (FY16:INR47.8b,30% of revenue). EBITDA declined 31% to INR21.4b. Profitability was, however, supported by recognition higher other income at INR7.9b (FY16:INR5.2b). Further, deferred incentives recognized increased to INR5.3b (FY16:INR3.6b).