| Delhi International Airport Limited | ||||
| Rating Reaffirmed | ||||
| 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 rating on the long-term bank facility of Delhi International Airport Ltd (DIAL) at ‘CRISIL A+/Stable’.
Rating action factors in air traffic recovery at DIAL post Omicron impact and closure of commercial property deal with Bharti Realty. CRISIL Ratings expects that total air traffic would cross average monthly levels of ~5.7 million passengers in fiscal 2020 within fiscal 2023.
DIAL is currently not making revenue share payments to Airport Authority of India since January 2021 by invoking Force Majeure under the terms of concession agreement. The matter is currently sub-judice. In case of an unfavorable outcome in the matter, it is expected that DIAL will be provided relief in terms of deferment of unpaid revenue share to AAI pursuant to article 16 of concession agreement and there will be no immediate payments which can impact the liquidity position of company adversely. Any deviation to this understanding will be a rating sensitivity factor.
The rating continues to reflect DIAL’s strong position as the operator of the Indira Gandhi International Airport in Delhi, moderate debt service metrics, healthy financial flexibility and favourable business structure. These strengths are partially offset by exposure to risks associated with delay in tariff orders and project implementation. |
Key Rating Drivers & Detailed Description Strengths Strong market position as the operator of the Indira Gandhi International Airport The company runs the largest airport (with around 67 million passengers handled in fiscal 2020) in India, with no other airport in northern India competing materially for international traffic. From 2010 till March 2020, operational performance remained sound; passenger traffic increased at a compound annual growth rate of more than 12%. The growth was impacted in fiscal 2021 due to Covid-19 leading to a drop of around 66% in overall traffic. However, there has been significant traffic recovery in fiscal 2022 and the traffic is expected to reach pre-covid level (fiscal 2020 level) in fiscal 2023.
In November 2019, Zurich Airport won the bid to develop Jewar International Airport (likely to be commissioned in 3-4 years), which is proposed to be located about 72 kilometer (aerial distance) from DIAL. With DIAL having attractive location and large catchment area and regulated business model of airport providing true-ups, assures safeguard against impact on traffic and non-aeronautical revenue growth in the long term.
Ring-fenced structure DIAL is structured as a special-purpose vehicle and ring-fenced from its parent, the GMR group. Supervision by AAI for all strategy decisions and related-party transactions; and presence of a Trust and Retention Account (TRA) with a payment waterfall mechanism ensure priority of debt repayment and also restrict free movement of funds within group companies. Also, ring-fencing from GMR group is further established by presence of Groupe ADP (S&P A/Negative) as a ~49% equity shareholder in a holding company of DIAL i.e. GMR Airports Ltd (holding company of DIAL).
Moderate debt-service metrics over long concession life and healthy financial flexibility DIAL has healthy track record of accrual generation, which supports debt-servicing metrics over long concession life expiring in 2036 (extendable by another 30 years). Though, drop in passenger footfalls due to Covid-19 related restrictions led to significant reduction in cover metrics with DSCR falling below 1x in fiscal 2021, it is expected that the growth in passenger traffic and non-aero revenues would lead to significant recovery in the DSCR profile in fiscal 2023.
DIAL has financial flexibility from an attractive land bank. As a part of the agreement with the Airports Authority of India (AAI; rated ‘CRISIL AAA/Stable’), the company has the right to develop about 230 acre of land around Delhi airport; out of this, nearly 69 acre has already been monetised. The company has also entered into a commercial property development (CPD) agreement with Bharti Realty for another 4.9 million square feet.
Weaknesses Exposure to risks associated with delay in tariff order and allowance of capex The regulatory regime for airport operators in India is still evolving. Risks pertaining to timeliness of tariff orders and their implementation still persist and will affect airport operators when they seek a true-up either for lower-than-expected revenue or higher capex for past control periods. DIAL is incurring around Rs 10,550 crore of capex till September 2023, which is expected to ramp up revenue entitlement in control period (CP) 4 beginning April 2024. Timing of this tariff order and increase in actual cash flows for ongoing capex will remain monitorable.
Financial profile recovery dependent on non-aero revenue recovery As per terms of concession, DIAL has to pay revenue share of 45.99% of its gross revenue to AAI. Non-aero revenue formed around 52% of overall revenue in fiscal 2020. They fell sharply on account of Covid-19 to Rs ~1,278 crore in fiscal 2021 (against Rs ~2,205 crore in fiscal 2020). The high proportion of revenue share compared to some peers makes recovery and growth of non-aero revenues critical for long term financial profile. It is expected non-aero revenue would recover above levels seen in fiscal 2020 within fiscal 2023 and grow by ~24-27% in fiscal 2024. Lower or higher recovery trajectory than anticipated will be rating sensitivity factor. |
Liquidity Adequate DIAL has unencumbered cash and equivalents of over Rs 1000 crore as of January 2022 excluding unutilized working capital of over Rs 430 crores. DIAL is holding additional Rs ~2000 crore (including deposits) marked for capex program. The 2022 bond has been already repaid. Relief from payment of revenue share to AAI since January 2021 has also helped maintain the liquidity position. The net cash accrual for fiscal 2023 is expected to be around Rs 642 crore while the debt servicing at around Rs 566 crore. |
Outlook Stable CRISIL Rating believes DIAL will continue to benefit from its healthy business risk profile, driven by a strong market position. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company DIAL was incorporated in March 2006 to operate, modernise, and undertake a phased expansion of the Indira Gandhi International Airport in Delhi under a 30-year concession expiring in 2036 (extendable by another 30 years). The company is a joint venture between the GMR group (64% held through GMR Airports Ltd), AAI (26%), and Frankfurt Airport Services Worldwide (10%). |
Key Financial Indicators(CRISIL adjusted numbers)
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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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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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