Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as InterGlobe Aviation Limited (NSE:INDIGO) with a market-capitalization of ₹383b, rarely draw their attention. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine INDIGO’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into INDIGO here.

Check out our latest analysis for InterGlobe Aviation

How much cash does INDIGO generate through its operations?

Over the past year, INDIGO has reduced its debt from ₹26b to ₹25b , which includes long-term debt. With this debt repayment, INDIGO currently has ₹71b remaining in cash and short-term investments for investing into the business. Moreover, INDIGO has produced cash from operations of ₹39b in the last twelve months, leading to an operating cash to total debt ratio of 159%, signalling that INDIGO’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In INDIGO’s case, it is able to generate 1.59x cash from its debt capital.

Does INDIGO’s liquid assets cover its short-term commitments?

Looking at INDIGO’s ₹61b in current liabilities, the company has been able to meet these commitments with a current assets level of ₹146b, leading to a 2.39x current account ratio. For Airlines companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Can INDIGO service its debt comfortably?

With debt at 35% of equity, INDIGO may be thought of as appropriately levered. This range is considered safe as INDIGO is not taking on too much debt obligation, which may be constraining for future growth.

Next Steps:

INDIGO’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for INDIGO’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research InterGlobe Aviation to get a more holistic view of the stock by looking at: