Kotak Institutional has upgraded to ‘buy’ from ‘sell’ in Indigo airlines’ parent company InterGlobe Aviation. It expects pressures on cost and yields to fade for the airline industry beyond a tougher FY21 and to continue the driving of double-digit growth for air travel on a long term perspective.

The brokerage has raised its fair value on InterGlobe Aviation stock to Rs 1,520 from Rs 900, expecting its growth over FY20-FY23 period.

Kotak Institutional Equities expects airlines to retain meaningful benefits of a low crude oil price in order to return to the profit after the losses between FY19-FY22 period. It also believes that there is limited scope to expand in the airline sector, as 90% or more of the current market share is covered by the top two players Indigo and SpiceJet.

The brokerage said, “We also expect Indigo to benefit from (1) uptick in fuel-cost savings with an increasing share of A320neos in the fleer over FY 2021-23 and (2) reduction in maintenance cost related to retiring of the old A320ceos”.