Rating Rationale
July 12, 2019 | Mumbai
Air India Limited
Rating Reaffirmed 
 
Rating Action
Rs.7400 Crore Non Convertible Debentures CRISIL AAA(SO)/Stable (Reaffirmed)
Rs.5500 Crore Non Convertible Debentures CRISIL AAA(SO)/Stable (Reaffirmed)
Rs.700 Crore Non Convertible Debentures CRISIL AAA(SO)/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AAA(SO)/Stable' rating on the non-convertible debenture (NCD) of Air India Limited (AIL; formerly, National Aviation Company of India Ltd [NACIL]).

The rating continues to reflect the strength of the credit enhancement provided by comprehensive, unconditional, and irrevocable guarantees from the Government of India (GoI) through the Ministry of Civil Aviation, and the trustee-administered payment mechanisms, for AIL's CRISIL rated NCDs.

CRISIL believes that GoI's guarantees for all the aforementioned NCD programmes of AIL, together with the structured payment mechanism, will ensure that all repayment obligations of the company are met in a timely manner. GoI's guarantees for all the CRISIL-rated NCD programmes will remain unaffected by any infirmity or irregularity on the part of AIL to meet any of its obligations under the NCD programmes. The guarantees will remain unaffected even if AIL is referred to the Board for Industrial and Financial Reconstruction, or comes under the purview of the Sick Industrial Companies Act, or any other authority notified under any law with powers in respect of revival or rehabilitation of sick companies or any dissolution, insolvency, liquidation, or winding up proceedings initiated by or against the issuer.

For the rated Rs 7400 crore NCD programme, GoI's guarantee does not cover the default or additional interest of 2 per cent per annum over the coupon rate payable to the debenture holders, in case of delays in debt servicing, if any, beyond the specified due dates.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of AIL and its subsidiaries, collectively, having common businesses and financial fungibility.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Unconditional and irrevocable guarantees from GoI covering entire rated amount: The rating is based on the strength of the credit enhancement facility provided by comprehensive, unconditional, and irrevocable guarantees for the entire rated amount from GoI through the Ministry of Civil Aviation. Furthermore, the rating is supported by GoI's undertaking that its guarantees will remain unaffected by any infirmity or irregularity on the part of AIL to undertake any of its obligations under the NCD programmes.

* Trustee-administered payment structure, designed to ensure full and timely payment to investors: A trustee-monitored payment mechanism is in place to ensure the timely payment of the interest and principal obligations on the NCD programmes. The trustee ensures timely servicing of AIL's obligations by GoI even if AIL does not have sufficient funds to do so. IDBI Trusteeship Services Ltd is the trustee to the Rs 5500 crore and the Rs 700 crore NCD programmes. For the Rs 7400 crore NCD programme, the trustee is SBICAP Trustee Company Ltd.
Liquidity

The above NCDs rated by CRISIL are guaranteed by GOI thus ensuring timely payment of debt obligations.

Outlook: Stable

The rating outlook on AIL's NCD programmes reflects CRISIL's outlook on the credit quality of GoI, the guarantor to the rated debt.

About the Company

AIL is wholly owned by GoI, and is India's national carrier, providing domestic and international air transport services. The company has an operating fleet of 128 aircraft, and an extensive network covering 55 Indian cities and 31 international destinations. AIL also has five wholly owned subsidiaries which provide passenger transport, cargo transport, ground-handling services, aircraft maintenance repair and overhaul services, and hospitality and catering services.

AIL was incorporated as NACIL on March 30, 2007, to merge the operations of the erstwhile Air India and Indian Airlines. NACIL was renamed as AIL on October 26, 2010.

GoI is looking at divestment of AIL; continued support to ensure timely debt obligations is nevertheless expected.

Key Financial Indicators
As on/for the period ended March 31 2018 2017
Reported Revenue Rs crore 22,529 21,860
Profit After Tax (PAT) Rs crore -5,384 -5,796
PAT Margins % -23.9 -26.5
Adjusted Debt/Adjusted Networth Times -2.2 -2.4
Interest coverage Times -0.02 0.42

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon rate (%) Maturity Date Issue size
(Rs.Cr)
Rating Assigned with Outlook
INE954K08014 Non Convertible Debentures 26-Mar-2010 9.13 26-Mar-2020 700.00 CRISIL AAA(SO)/Stable 
INE954K08022 Non Convertible Debentures 27-Sept-2011 9.84 27-Sept-2026 4000.00 CRISIL AAA(SO)/Stable 
INE954K08030 Non Convertible Debentures 27-Sept-2011 10.05 27-Sept-2031 1500.00 CRISIL AAA(SO)/Stable 
INE954K08048 Non Convertible Debentures 19-Nov-2012 9.08 19-Nov-2031 3807.60 CRISIL AAA(SO)/Stable 
INE954K08055 Non Convertible Debentures 30-Nov-2012 9.08 30-Nov-2031 1235.40 CRISIL AAA(SO)/Stable 
INE954K08063 Non Convertible Debentures 18-Dec-2012 9.08 18-Dec-2031 2357.00 CRISIL AAA(SO)/Stable 
 
Annexure - List of Entities Consolidated
Name of entities Extend of consolidation Rational for consolidation
Air India Express Limited Full Strong managerial, operational, and financial linkages
Air India Transport Services Limited Full Strong managerial, operational, and financial linkages
Airline Allied Services Limited Full Strong managerial, operational, and financial linkages
Air India Engineering Services Limited Full Strong managerial, operational, and financial linkages
Hotel Corporation of India Limited Full Strong managerial, operational, and financial linkages
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Non Convertible Debentures  LT  13600.00
11-07-19 
CRISIL AAA(SO)/Stable      20-07-18  CRISIL AAA(SO)/Stable  24-11-17  CRISIL AAA(SO)/Stable  07-01-16  CRISIL AAA(SO)/Stable  CRISIL AAA(SO)/Stable 
                10-02-17  CRISIL AAA(SO)/Stable       
All amounts are in Rs.Cr.
 
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Entities Based on Government Support

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