IndiGo Shares Gain As HSBC Maintain Optimism After Business Class Launch

Shares of InterGlobe Aviation Ltd. gained on Thursday as HSBC remained bullish with the airlines launching business class service on some of its key metro routes.

IndiGo’s business class launch ends Vistara and Air India's monopoly, HSBC said in a note on Aug. 21. This may not be margin accretive in the near term, but could reduce leakage of corporate traffic and strengthen positioning, it said.

While the fare trend is unknown, capacity tightness could keep airfares high, it said. "Strategic changes could place Indigo in a strong competitive position in the long term."

IndiGo’s launch price for the business class seat is quite competitive and should make up for features missing from its premium product, it said. "Yet, there is some market pessimism about the demand for IndiGo’s premium product."

The key focus will be on the third quarter for the airline operator, which is a seasonally strong quarter, the note said.

The brokerage maintained a 'buy' rating with a target price of Rs 5,165 per share from Rs 5,120 apiece earlier. This implies an upside of 20% from the previous close.

Shares of IndiGo's rose as much as 4% before paring gains to trade 3.18% higher at Rs 4,436.7 apiece, compared to a 0.2% advance in the benchmark Nifty 50 as of 10:41 a.m.

The stock has risen 79% in the last 12 months and 49% on a year-to-date basis. Total traded volume so far in the day stood at 3.2 times its 30-day average. The relative strength index was at 59.