| Airports Authority of India | ||||
| Rating reaffirmed at 'CRISIL AAA / Stable'; rated amount enhanced for Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable’ rating on the bank facilities of Airports Authority of India (AAI). The rating continues to reflect the strategic importance of AAI to the government and healthy financial risk profile, backed by strong cash accrual and robust capital structure. These strengths are partially offset by exposure to the risk of revenue concentration because of the limited number of profitable airports. |
Analytical Approach The rating factors in support from the Government of India. AAI is expected to receive distress support from the government for timely servicing of debt, considering the entity's strategic role in the implementation of the country’s aviation policy. |
Key Rating Drivers & Detailed Description Strengths High strategic importance to the government AAI was set up through an Act of Parliament in 1995, underscoring the authority's importance to the government as a nodal agency to regulate air traffic control (ATC) and develop and maintain airports. The authority manages the entire airspace in India and adjoining ocean areas. Airspace being a sensitive security issue, the government prefers to have a state-owned agency managing it. Investment in airport infrastructure is vital to economic growth and, therefore, creates a strong incentive for the government to continue supporting the nodal agency. Though many of the airports managed by AAI are small and unprofitable, they provide connectivity to far-flung places and, hence, are important for economic development. All major capital expenditure (capex) of AAI is approved by the government. The board of AAI also has a representative of the ministry of civil aviation. In addition, the government provides grants to AAI for carrying out infrastructure development of specified areas. In fiscal 2021, AAI received grants from the government of Rs 662 crore, against Rs 478 crore in the previous fiscal. For the current fiscal, grants of Rs 1,093 crore are expected from the government.
Healthy financial risk profile AAI’s financial risk profile is supported by robust capital structure and strong cash accruals. This can be seen through net cash accrual of Rs 2,855 crore in fiscal 2020 and Rs 1,148 crore in fiscal 2019.
However, this was impacted in fiscal 2021 due to the Covid-19 pandemic. The operating revenue dropped by around 66% in fiscal 2021, compared to the previous fiscal. The force majeure invoked over revenue sharing by Mumbai and Delhi airports in fiscal 2021 further added to the pressure on cash flow. Traffic has shown steady recovery in fiscal 2022, leading to moderation in losses as compared to last year. Also, given its strong market position in the aviation industry and pick-up in traffic seen with easing of lockdowns and travel restrictions, accrual and cash flow are expected to recover within fiscal 2023 (in comparison to fiscal 2020). In addition, AAI has started receiving revenue sharing payments from the Mumbai International Airport Ltd in the fourth quarter of the current fiscal and is expected to receive payments from Delhi International Airport Ltd in fiscal 2023. Delays in correction of cash flow from slower-than-anticipated growth in traffic and resumption of revenue share payments from the Delhi airport will remain a rating sensitivity factor.
The financial risk profile is expected to remain healthy despite planned debt-funded capital expenditure (capex) of over Rs 8,000 crore in the next 2-3 years. CRISIL Ratings will monitor the impact of any larger-than-expected debt-funded capex and working capital requirement on the capital structure.
Weakness Significant revenue concentration due to limited number of profitable airports Few airports in India are profitable. Moreover, following privatisation of airports in Delhi and Mumbai (the two largest and most profitable airports), all income, other than ATC, now accrues to the respective joint venture companies (JVCs). As per the concession agreements, AAI receives revenue share of around 46% from the Delhi JVC and around 39% from the Mumbai JVC. However, loss of revenue from privatisation is mitigated by concession fees. |
Liquidity: Superior Free cash and equivalent were around Rs 1,000 crore as on February 28, 2022. AAI also has unutilised working capital facilities of Rs 2,000 crore. Major chunk of the one-time upfront payment of over Rs 1,800 crore on account of the six public-private partnership airports has been received in fiscals 2022 and 2021, further boosting liquidity. Furthermore, AAI expects to get upfront revenue of Rs 2,000-2,500 crore from further privatisation in the next two fiscals. |
Outlook Stable AAI has sole authority over ATC activities in the airspace of India and, therefore, will remain strategically important to the government. Backed by healthy track record and control over 120 airports in India, the organisation will retain its strong market position. |
Rating Sensitivity factors Downward factors
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About the Company AAI creates, upgrades, maintains and manages civil aviation infrastructure on the ground and within the territorial boundaries of India. As of February 2022, AAI owns and maintains 136 airports, comprising 81 domestic airports, 21 civil enclaves, 10 custom airports and 24 international airports. It provides air traffic management services over the entire airspace in India and adjoining oceans to ensure safety of aircraft operations. It provides air navigation services over 2.8 million square nautical miles of airspace. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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This Annexure has been updated on 21-Mar-2022 in line with the lender-wise facility details as on 21-Mar-2022 received from the rated entity.
Criteria Details
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