Interglobe Aviation Ltd Management Discussions.

Economic Overview

In the past few months, the world economy has undergone a severe crisis due to the outbreak of COVID-19. As a response to the pandemic, Governments across the globe instituted strict containment measures such as restrictions on businesses, public gatherings, labour mobility, lockdowns and travel bans. All the major economies including India are suffering the economic consequences of these restrictions. As per the International Monetary Funds ("IMF") World economic Outlook (April 2020 edition), the global economy is projected to contract sharply by negative 3% in 2020, much worse than during the 2008-09 financial crisis. Furthermore, the IMF estimates that in a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to rebound and to grow by 5.8% in 2021 as economic activity normalises, helped by policy support. The advanced economy group is forecasted to grow at 4.5%, while growth for the emerging market and developing economy group is forecasted at 6.6%.

Countries across the world are currently highly focused on addressing public health care requirements by allocating additional resources. Beyond strengthening health care systems, policies are also needed to limit the impact of the pandemic on economic activity. Several central banks have also eased monetary policies to boost the economy. Broad-based stimulus and liquidity facilities to reduce systemic stress in the financial system can lift the confidence of investors and prevent an even deeper contraction in consumer demand.

The global growth forecast remains uncertain due to factors that are difficult to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, supply disruptions, the repercussions of the dramatic tightening in global financial market conditions and shift in spending patterns.

The Indian economy has also been disrupted by the COVID-19 pandemic. Initially, the World Bank in its Global Economic Prospects (January 2020 edition) projected growth rate of the Indian economy to be in the range of 4.8-5% for FY 2020, which would improve to 5.8% in FY 2021 and 6.1% in FY 2022. However, the shutdown of many economic activities to control COVID-19 has resulted in reduced GDP growth prospects, to a modest 1.9% for FY 2021. The medium to long-term growth prospects of Indian economy remains robust, with growth in FY 2022 projected to be 7.4%.

Industry Overview

A. Current Scenario

As the COVID-19 pandemic continues to affect the economy and human health, the extent of its impact on the future development of global commercial aviation remains uncertain. Airlines around the world are confronting the challenge of a sharp decline in demand, complicated by uncertainty as to when the virus will be under control and travel can return to normal. The collapse in demand has led major global airlines to announce severe cost-cutting measures, urgent requests for government assistance, and in some cases, grounding of fleet.

Given the global nature of the COVID-19 pandemic that threatens to throw many economies into recession, it could take passenger air travel demand anywhere from several months to several years to recover to 2019 levels. This return to normalcy in airline travel will depend on multiple factors including the speed of virus containment, lifting of country border closures, restoration of confidence in air travel, and a return to normal economic and social activity.

After rapid expansion over the last decade when Indian aviation registered a Compound Annual Growth Rate ("CAGR") of around 13.6% in domestic demand measured in terms of Revenue Passenger Kilometers ("RPKs"), it slowed down to 5% in 2019. The deceleration in growth was primarily driven by supply-side constraints due to industry consolidation subsequent to the cessation of operations of Jet Airways. Adding significantly to industry headwinds, COVID-19 hit the aviation Industry in Q4 FY 2020. In response to the virus, the Government banned international flights with effect from March 22, 2020 and domestic flights with effect from March 25, 2020. Even before these extraordinary measures were taken, the travel demand started to slow down significantly. This had a major impact on the financial performance of the Indian carriers.

In the medium to long term, once the crisis is over, the demand outlook for aviation remains very strong in India largely driven by under-penetration, rise in working population and expansion of middle class. (Refer to the section below for key growth highlights in the Indian aviation during the pre-pandemic period.) Furthermore, the rise in trade and tourism is also likely to boost the industry. Based on the recent data published by the Civil Aviation Administration of China ("CAAC"), daily flights in China have recovered by 43% as of April 21,2020 as compared to March 2020. Thus, although the COVID-19 outbreak will have a near-term negative impact, aviation in India should gradually recover and get back on track for rapid growth.

B Growth prospects - Long term overview

The civil aviation industry in India has emerged as one of Indias fastest-growing sectors over the past few years. India has now become the third-largest domestic aviation market in the world. Growth in air-passenger traffic in India has been particularly strong since the new millennium, especially with rising incomes, added connectivity and affordable fares. The Indian aviation industry has seen an expansion in the total number of passengers from 27.73 million in Q4 FY 2016 to 44.63 million in Q3 FY 2020, growing at a CAGR of 12.6% during the period. As per IBEF report by 2036, India is projected to have 480 million passengers, which will be more than that of Japan (just under 225 million) and Germany (just over 200 million) combined.

To cater to the rising air traffic, the Government of India has been working towards increasing the number of airports. Airport Authority of India ("AAI") has planned to invest Rs. 25,000 crores (USD 3.58 billion) in the next five years to augment facilities and infrastructure at the airports. As of March 2019, India had 103 operational airports. Government has envisaged increasing the number of operational airports to 190-200 by FY 2040. Introduction of new terminals in Mumbai, Bangalore, Chennai and Kolkata will also add to the infrastructure capacity. Further, The GOI has allowed 100% FDI under automatic route for greenfield and brownfield airport projects.

As per the present FDI policy, 100% FDI is allowed in scheduled air transport services/domestic scheduled passenger airlines and regional air transport services. However, FDI over 49% requires prior government approval (other than where such investment is by NRIs). In respect of Indian companies operating scheduled or non-scheduled air transport services, foreign airlines are only permitted to invest up to 49% of the share capital of such companies, with prior government approval. Furthermore, FDI is subject to the condition that Substantial Ownership & Effective Control ("SOEC") shall be vested in Indian Nationals as per the Aircraft Rules, 1937.

Moreover, Indias exports and imports have been growing strongly over the past decade. Growth in trade augurs well for the aviation industry as they handle about 30% of Indias total trade by value. Cargo has also seen a rising demand over the last few years. For example, during FY 2006-2019, domestic freight traffic increased at a CAGR of 8.3%, while international freight traffic grew at a CAGR of 6.9% during the same period. As per IBEF, by 2023, total freight traffic is expected to touch 4.14 million tonnes exhibiting growth at a CAGR of 7.3% between FY 2016 and FY 2023. International freight traffic is expected to grow at a CAGR of 7.1% while domestic freight traffic is expected to grow at a CAGR 7.5% between FY 2016 and FY 2023.

The share of travel and tourism in Indias GDP was 10.4% in 2018. Indian economy and the aviation industry have a symbiotic relationship and each benefit immensely with the growth of other. While the fast-paced growth of the aviation industry over the past decade can be largely attributed to the robust economic growth, economic growth has also been greatly benefitted by the growth in aviation industry.

According to International Civil Aviation Organization ("ICAO"), for every $100 of output produced and every 100 jobs generated by air transport, an additional demand of around $325 and 610 jobs are triggered in other industries, globally.

The aviation industry is further expected to increase its share in the Gross Domestic Product and help the economy by creating jobs and an increase in production through trade and tourism.

In addition to the economic benefits, aviation also provides significant social benefits. It often serves as the only possible means of transportation to provide health care and food supplies to many communities which are inaccessible. It is a fast and reliable way to deliver urgent humanitarian aid during natural disasters.

In challenging topographies like North East, air transport functions as an essential service to provide lifeline connections that otherwise would not be available. In this context, various Indian airlines have been instrumental in helping the country in the times of COVID-19 outbreak.

Company Overview

IndiGo ("your Company" or "we") is Indias largest passenger airline operating as a low-cost carrier. Serving 86 destinations including 24 international destinations, we provide passengers with a simple, unbundled product, fulfilling our singular brand promise of providing "low fares, on-time flights, and a courteous and hassle-free service" to our customers. In addition to passenger transportation, our activities primarily include cargo and mail services on scheduled flights.

IndiGo commenced operations in August 2006 with a single aircraft and has grown its fleet to 262 aircraft as of March 31,2020. Your Company had placed an order of 430 fuel-efficient A320 NEO family aircraft in 2011 and 2015, of which 114 have been delivered as of March 31,2020. In addition to this, in October 2019, your Company placed an additional firm order for the 300 A320 NEO family aircraft, which includes A321 XLRs in addition to A320 NEOs and A321 NEOs.

At the end of March 2020, we had 100 fuel-efficient A320 NEOs giving us 15% lower fuel burn compared to the current generation of A320 CEOs without sharklets. We also have 14 A321 NEOs in our fleet with higher seating capacity, lower unit costs and longer range compared to A320 NEOs. We had placed an order with Pratt & Whitney to power 150 of our A320 NEO family aircraft. All the A320 NEO family aircraft that we have today use the Pratt & Whitney GTF engine. In addition to this, in June 2019, we placed an order with CFM to provide engines for 280 of our NEO aircraft. With this order, we have identified our engine partner for the initial 430 A320 NEO family order.

We had also placed an order with Avions de Transport Regional GIE, or ATR, in August 2017, for the purchase of up to 50 ATR72-600 turboprop aircraft. These aircraft have given us the opportunity to, once again, redefine air travel in cities that were devoid of reliable air service so far, or were subject to exorbitant airfares. As of March 31,2020, we had 25 ATR aircraft in our fleet.

In FY 2020, your Company was awarded the Best Low-Cost Airline in Central Asia and India for the tenth consecutive time at the Skytrax World Airline Awards 2019. Your Company is ranked as one of the best airlines in terms of on-time performance for the third consecutive year amongst the top 20 global mega-airlines based on data compiled by the OAG. IndiGo is the only Indian carrier to have made it to this list, three years in a row.

IndiGo has been recognised among the most valuable and strongest airline brands, as per the Brand Finance Airlines 50 report for 2020. Further, your Company was also awarded the Safety Partner - Best Aircraft Turn Around Activity by DIAL; the Best Domestic Airline at FICCIs first edition of Travel and Tourism Excellence Awards; and the Companies with Great Managers Award by People Business in partnership with The Economic Times. These awards are a testimony to our best-in-class service quality. Your Companys learning academy ifly also won awards for best practices in Learning and Development under six different categories at the TISS LEAPVAULT Chief Learning Officer ("CLO") awards by the Tata Institute of Social Sciences.

IndiGo has been recognised among the most valuable and strongest airline brands, as per the Brand Finance Airlines 50 report for 2020.

Operational Highlights

Particulars

For the year ended March 31st

2020 2019 Change
ASK (in millions) 96,240 81,028 18.8%
RPK (in millions) 82,540 69,811 18.2%
Passenger Load Factor (%) 85.8% 86.2% -0.4 pts
Number of Scheduled Passengers Carried (in thousands) 75,026 64,743 15.9%
Block Hours 1,022,515 853,553 19.8%
Number of Scheduled Destinations Served as of the period end 86 68 26.4%
Total Number of Flights 522,853 448,904 16.5%
Number of Aircraft at period end 262 217 20.7%

Financial Highlights

The following table sets forth key financial data for the periods indicated:

Particulars

For the year ended March 31st

2020 2019 Change
EBITDAR Margin 14.2% 18.3% -4.1 pts
Net Profit Margin -0.7% 0.6% -1.2 pts
RASK (Rs.) 3.77 3.57 5.6%
CASK (Rs.) 3.80 3.59 5.8%
CASK Ex-Fuel (Rs.) 2.50 2.11 18.4%

Financial Performance

Income

Passenger ticket revenue:

Passenger ticket revenue increased by 25.0% from Rs. 251,576.91 million in FY 2019 to Rs. 314,470.59 million in FY 2020.

Revenue from ancillary products and services:

Revenue from ancillary products and services primarily include cargo, special service requests, ticket modification and cancellation, in-flight sales and tours. Revenue from ancillary products and services increased by 30.2% from Rs. 30,309.56 million in FY 2019 to Rs. 39,458.47 million in FY 2020.

Other Income:

Other Income primarily comprises of financial income on the cash and other nonoperating income. Other Income increased by 15.9% from Rs. 13,245.98 million in FY 2019 to Rs. 15,355.09 million in FY 2020.

Revenue per Available Seat Kilometre ("RASK):

RASK increased by 5.6% from Rs. 3.57 in FY 2019 to Rs. 3.77 in FY 2020, driven by an increase in passenger yield and increase in unit ancillary revenue.

Expenses

Total expenses increased by 25.3% from Rs. 299,687.48 million in FY 2019 to Rs. 375,471.79 million in FY 2020.

Aircraft fuel expenses:

Aircraft fuel expenses increased by 4.3% from Rs. 119,427.93 million in FY 2019 to Rs. 124,537.94 million in FY 2020, against 18.8% increase in capacity, on a year over year basis, and offset by reduction in IOCL ATF prices and increase in the number of fuel-efficient NEO aircraft.

Aircraft ownership cost:

Aircraft ownership cost comprises of aircraft and engine rentals, supplementary rental and aircraft maintenance cost, depreciation and amortisation, and net interest expense. Aircraft ownership cost increased by 41.5% from Rs. 79,171.24 million in FY 2019 to Rs. 112,052.99 million in FY 2020.

Employee costs:

Employee costs increased by 46.7% from Rs. 32,105.57 million in FY 2019 to Rs. 47,099.59 million in FY 2020.

Foreign exchange (gain)/ loss:

Foreign exchange losses increased from Rs. 4,674.87 million in FY 2019 to Rs. 15,461.89 million in FY 2020, primarily driven by mark to market losses on the capitalised operating lease liability, as a result of IndAS 116.

Other expenses:

Other expenses increased by 19.9% from Rs. 29,482.57 million in FY 2019 to Rs. 35,340.04 million in FY 2020.

Cost per Available Seat Kilometre ("CASK"):

CASK increased by 5.8% from Rs. 3.59 in FY 2019 to Rs. 3.80 in FY 2020, primarily driven by increase in unit employee cost, unit supplementary rental and aircraft maintenance cost, and higher mark to market losses as a result of rupee depreciation.

Your Company reported a net loss of Rs. 2,336.78 million in FY 2020 against a net profit of Rs. 1,572.47 million in FY 2019. This resulted in an increase/decrease in the Return on Equity from 2.3% in FY 2019 to -4.0% in FY 2020.

Balance Sheet

The total cash increased by 33.1% to Rs. 203,769.40 million as of March 31,

2020, comprising of free cash of Rs. 89,280.97 million and restricted cash of Rs. 114,488.43 million. Total debt for your Company was Rs. 227,191.68 million, including capitalised operating lease liability of Rs. 202,848.64 million, as of March 31,2020.

Impact of COVID-19 and Company Outlook

COVID-19 has led to major disruptions across world economies, and has led to the implementation of several government-imposed restrictions, particularly in the travel sector. In India too, the Government took early actions that led to cessation of all scheduled passenger flights for a period of 61 days starting March 25. While, the domestic business largely remained as expected during January to February 2020, we began reducing international operations from January 2020. January and February 2020 results were not materially impacted by this, however, March numbers were particularly impacted. Consequently, the overall Q4 FY 2020 results were impacted as well.

We have taken a number of actions to mitigate the impact and risks of COVID-19 to our business. These actions include cost reduction initiatives, liquidity enhancement, capacity reduction, and improvement in fleet mix. We are extremely focused on ensuring the health and safety of the customers and employees, and have designed and implemented a new set of standard operating procedures to combat the virus.

We have planned a phased ramp- up of capacity in line with demand expectations going forward. Basis this, we aim to deploy around 60-70% capacity in the third quarter of FY 2021, on a year over year basis. Given the uncertainty of the environment we will continue to monitor these plans and make adjustments on the basis of demand, as required.

The A320 N€O aircraft that we operate have structurally lower costs than our A320 CEOs. Hence, we plan to increase the mix of NEO aircraft to our fleet to leverage these cost advantages. We will continue to take deliveries of new NEO aircraft and balance this with gradual retirement of our CEO aircraft. Most of the new aircraft will be financed through an operating lessor model, generating significant liquidity for us in FY 2021.

We have a strong balance sheet and healthy cash balance. As of March 31, 2020, we ended with a total cash balance of 204 billion rupees, of which 89 billion rupees was free cash.

We are confident that we will emerge from the crisis much stronger and nimbler than when we entered.

Opportunity, Threats, Risks, and Concerns

The Indian aviation industry is expected to continue to grow at a robust pace in the long term. Increasing middle-class population, a favourable demography, along with the anticipated continuation of economic development and growth in household incomes support the positive long-term outlook. The growth will be further fuelled by strong growth in tourism, increased aircraft penetration from current levels, and the expansion of aviation infrastructure.

The air travel infrastructure of India has significantly grown over the last decade and we, at IndiGo, take pride in taking a leading role in building this critical infrastructure in India. We believe there is a still a significant growth opportunity in the air travel market in India, and we are ready to capitalise on this opportunity.

At IndiGo, we believe our structural cost advantage gives us the ability to withstand various challenges, even the current pandemic. However, our growth also depends upon certain external factors.

Set forth below are some of the risks that may potentially have an adverse impact on our business, financial results and our performance outlook.

a. Pandemic Risk:

Whenever there is an outbreak of a communicable disease on an international level, air travel inevitably becomes the focus of much attention due to the potential for air travel to increase infection rates. COVID-19 cases amongst IndiGo staff or customers may result in disrupted operations. This could also result in a potential damage to our reputation and a decreased demand for travel. COVID-19 has presented itself as a significant challenge for airlines globally. Any outbreak of a pandemic in the future can also significantly affect our operations and result in financial losses.

b. Operational issues with certain A320 N€O engines:

We have experienced operational issues with certain A320 NEO engines, which has impacted our operations. These operational challenges have required the engine supplier to deliver upgraded engines and provide spare engines in the interim to reduce operational disruptions.

c. Exceptional variation in fuel prices:

Aircraft fuel expenses are the most significant expense of our total cost. The price of fuel cannot be accurately predicted because of numerous economic and political factors and events that govern them. Our operating results could be negatively impacted by any adverse movement in fuel prices.

d. Adverse movement in foreign exchange as a large proportion of our expenses are exposed to foreign exchange rate risk:

Our costs including aircraft and engine lease rentals, aircraft and engine maintenance and aircraft insurance are denominated in foreign currency. Adverse movement in foreign exchange may negatively impact our profitability.

e. Airport Infrastructure constraints and increased airport costs in India:

As we expand our fleet, our growth is dependent on adequate airport infrastructure in India to support our operations. Non-availability of terminal space, slots and aircraft parking and any increase in the cost of airport landing and departures may adversely affect our operations. While the Governments initiatives towards the construction of newer runways or terminals may ease some of these constraints, availability of adequate airport infrastructure will likely continue to be a challenge. Replacing A320 aircraft with A321 NEOs in slot constraint airports is expected to further help in slot maximisation.

f. Competition in the airline industry:

The airline industry is highly competitive. We face intense competition from other low-cost carriers as well as full-cost carriers that operate on our routes.

We may also face competition from airlines that could be established in the future.

g. Changes in the Government regulations:

The civil aviation industry in India is regulated by the Ministry of Civil Aviation ("MoCA"), the DGCA and the Airports Authority of India ("AAI"). The regulations are extensive, complex and cover all major aspects of operations, including basic licenses, aircraft acquisitions and routing. Any changes in regulations, or the imposition of additional restrictions and conditions, can affect our business and operations.

h. Inadequate market supply of pilots and inability to recruit and retain key talent:

Our business requires us to attract and retain highly-skilled, dedicated and efficient management personnel, as well as pilots and other critical employees. Any shortfall in the availability of pilots or our inability to hire, train or retain qualified employees may have an adverse effect on our operations and our ability to grow.

i. Breaches in IT/ Cybersecurity:

Airlines are heavily dependent on IT and complex network technology. These complex systems and technologies are subject to interruptions and delays caused by catastrophic events, acts of war or terrorism, power loss, computer and telecommunications failures, security breaches and similar events or disruptions. Any such system interruptions or security breaches may disrupt our normal business operations, potentially leading to loss of business, subject us to data breach and consequently also damage to your Companys reputation.

j. Reputation Risk:

We are exposed to reputation damage if any of our aircraft is subject to an emergency, accident, terrorist incident or any other disaster. Further, any adverse experience or harm arising to our customers or vendors, while dealing with your Company, can also potentially lead to a loss in our reputation.

Internal Control Systems and their Adequacy

Our internal control procedures are adequate to ensure compliance with various policies, practices and statutes in keeping with the organisations pace of growth and increasing complexity of operations. We have in place systems and processes commensurate with our size and nature of business and we maintain a system of internal controls designed to provide reasonable assurance regarding the following:

• Effectiveness and efficiency of operations

• Adequacy of safeguards for assets

• Prevention and detection of frauds and errors

• Accuracy and completeness of the accounting records

• Timely preparation of reliable financial information

An independent internal audit is carried out to ensure the adequacy of the internal control system and adherence to policies and practices. The scope of internal audit activity is guided by the annual audit plan, which is approved by the Audit Committee of the Board. The Audit Committee reviews reports submitted by the independent internal auditor and monitors follow up and corrective action are taken.

Human Resources

At IndiGo, we endeavor to continuously improve the work environment, thereby leading to better customer experience. In order to achieve this, we

• Invest in the learning and development of our employees

• Seek regular feedback and devise action plans on the basis of inputs

• Provide ample opportunities to showcase their skills

• Recognise superior performance and

• Keep the workforce updated on the latest developments in your Company and industry through leadership interactions.

Your Company has significantly invested in the training and development of our employees on a regular basis through our state-of-the-art learning academy, ifly. We also launched our second training centre of the academy in Bengaluru, thereby extending our commitment to this cause. As of March 2020, we have a dynamic set of 27,812 employees on your Companys rolls including 4,017 pilots and 6,573 cabin crew.

The health of our employees is of paramount importance. With the outbreak of COVID-19 virus, IndiGo has taken extra precaution at airports and other workplaces to ensure that all its employees are protected well against the virus. These measures include providing the front-liners with PPE kits, conducting regular sanitisation drives across our offices and regular communication with employees to ensure their physical and mental wellbeing. These are challenging times, and we have taken several steps to stay connected with our workforce and to support them during these uncertain times.

On behalf of the Board of Directors of

InterGlobe Aviation Limited

Meleveetil Damodaran

Chairman

DIN: 02106990

Ronojoy Dutta

Whole Time Director and

Chief Executive Officer

DIN: 08676730

Date: June 3, 2020

Place: Gurgaon