Rating Rationale
July 13, 2020 | Mumbai
Navi Mumbai International Airport Private Limited
Rating continues on 'Watch Negative'
 
Rating Action
Total Bank Loan Facilities Rated Rs.10300 Crore
Long Term Rating CRISIL BB+ (Continues on 'Rating Watch with Negative Implications') 
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL rating on the long-term bank facility of Navi Mumbai International Airport Private Limited (NMIAL) continue to be on 'Rating Watch with Negative Implications'.
 
CRISIL has noted that a First Information Report (FIR) was filed against Mumbai International Airport Limited (MIAL) (and among others including other members of GVK group) by Central Bureau of Investigation (CBI) on June 27, 2020.  The FIR alleges financial fraud causing loss to Government Exchequer. As per management representation, the inquiry is at investigation stage and currently there are no restrictive actions and penalties on the company. That said, CRISIL will continue to monitor the developments and take rating action when clarity emerges regarding any impact on MIAL or NMIAL.
 
The rating continues to reflect the strong experience of the parent, in developing and operating airports and its technical, managerial and financial support, if required, for the project. The rating also factors in the regulated hybrid till tariff structure, and a ring-fenced business structure with the presence of City and Industrial Development Corporation (CIDCO) of Maharashtra which lowers the post commissioning risk to some extent. These strengths are partially offset by susceptibility to project related risks, especially in regards to implementation and stabilisation of operations.

Analytical Approach

For arriving at the rating, CRISIL has combined the business and financial risk profile of MIAL and NMIAL. That's because both airports will serve common catchment of the Mumbai metropolitan area, have common management and board members leading to a complementary strategy in operations phase and CRISIL's understanding that MIAL will provide timely support, if required, to NMIAL for implementation and stabilisation.

CRISIL has applied its parent notch-up framework to factor in the extent of financial, operational, and managerial support available to NMIAL from MIAL.

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
Strengths
* Strong support from the parent MIAL
Benefits are expected from the operational, management and financial support of the parent during implementation and stabilisation of the project. MIAL has a track record of timely completion of Terminals 1 and 2 of the Chhatrapati Shivaji Maharaj International Airport, Mumbai. The management support is through common board directors and senior management being deputed from MIAL. The parent is also likely to provide financial support, if required, to meet any cost overrun, and shortfalls in debt servicing in the first few years of operations. MIAL has agreed to provide sponsor undertaking for shortfall in termination payment and cost overrun. Additionally, the parent has agreed to provide corporate guarantee for equity contribution into NMIAL and shortfall in debt service reserve amount (DSRA) for up to four years from start of commercial operations or achievement of DSCR of 1.25x and 1.33x for two consecutive years whichever is later.

NMIAL is critical for MIAL on account of MIAL's majority ownership in NMIAL, the size of the overall project and strategic importance of NMIAL to MIAL for growth given the operational constraints at MIAL.

* Relatively lower implementation risks deriving strength from the concession agreement
Airport projects have relatively lower implementation challenges than other infrastructure asset classes, NMIAL further benefits from the provisions in the concession agreement which provides for extension of construction period and concession period if entire land for the project is not provided by CIDCO by 4th November 2018. Furthermore, presence of CIDCO for carrying out land acquisition and aiding in getting requisite regulatory approvals lowers implementation risks. CIDCO has handed over 99.65% unencumbered land to NMIAL. Appointed Date has been declared on July 7, 2018 and any delays in project implementation on account of delay in balance land hand over shall be adequately compensated by CIDCO as per the provisions of the Concession Agreement.  Presently, key approvals for the project including Stage 2 Forest Clearance, Environment Clearance, permission for clearance of Mangroves and Development Plan have been obtained.

The project is critical for Mumbai metropolitan region given that the current airport operated by MIAL has capacity constraints on account of infrastructure limitations. Implementation of the new airport is also being monitored by Government of Maharashtra and the Ministry of Civil Aviation for streamlining any project implementation issues. Such focus aids the implementation of the project.

* Regulated tariff structure with assured returns on aeronautical (aero) assets
Tariff determination will be regulated by the Airports Economic Regulatory Authority of India and will follow a favourable hybrid-till mechanism. This will allow for regulated returns on aero assets and an upside potential for 70% of non-aero revenue.

Any delays in approval of first tariff order when the project is nearing completion and difference in determination of the aeronautical asset base for tariff determination shall be key rating monitorable.

Weaknesses
* Exposure to project risks, given the nascent stage
Concession agreement has been signed with CIDCO in January 2018. Presently, land acquisition and clearance are in advanced stages and pre-development work involving land filling and diversion of the Ulwe River, to be carried out by CIDCO, which are of moderate complexity are in progress.

Given the nascent stage of the project, the company is exposed to risks of delay in land acquisition, completion of pre-development work and pending approvals which can result in cost and time overruns.

* Exposure to offtake risk, after commissioning
Offtake after commissioning, is expected to be supported by availability of time slots and cargo handling facilities at the new airport which will cater to pent up demand from the Mumbai metropolitan region on account of operational constraints at the existing airport. MIAL being the promoter will aid smooth stabilisation and continued healthy traffic growth. However, overall costs and presence of road and allied connectivity would be key considerations for airlines moving into the new airport, which may constrain offtake in the initial few years. Furthermore, once operational, development of non-aeronautical revenue streams will be subject to demand and pricing risks.
Liquidity Adequate

Operation are expected to start by fiscal 2023. The company has raised long term loans for financing the debt portion of the capital expenditure. MIAL has invested ~Rs 905 crore as of March 31, 2020 towards equity commitment. The parent is likely to provide timely support, if required, during implementation and stabilisation phases.

Rating Sensitivity Factors
Upward factors
* Upward rating action on parent MIAL from current levels of 'CRISIL BB+/CRISIL B/Rating Watch with Negative Implications/CRISIL A4+'
* Project completion without deviations in time and cost (as per Concession terms) along with clarity on first control period tariff order

Downward Factors
* Downward rating action on parent MIAL from current levels of 'CRISIL BB+/CRISIL B/Rating Watch with Negative Implications/CRISIL A4+'.
* Delay in land handover and disbursement of project loans having impact on project commissioning.

About the Company

NMIAL is a 74% subsidiary of MIAL. The remaining stake is held by CIDCO, which is the concessioning authority for the project. NMIAL won the bid for developing, operating, and maintaining the greenfield Navi Mumbai airport in Maharashtra, under a 40-year concession (additional 20 years subject to a re-bid with NMIAL having right of first refusal within 5% of the winning bid). Phase I is expected to be implemented at a cost of Rs 14181 crore (including cost of Pre-development Works funded by CIDCO as Soft Loan), with a capacity of 1 crore passengers per annum.

Key Financial Indicators*
Particulars Unit 2019 2018
Revenue Rs Crore NA NA
Profit After Tax (PAT) Rs Crore NA NA
PAT Margin % NA NA
Adjusted debt/adjusted networth Times NA NA
Adjusted interest coverage Times NA NA
*Not applicable as the project is under implementation.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs.Cr) Complexity Levels Rating assigned with outlook
NA Proposed Long Term Bank Loan Facility NA NA  
NA		 10300 NA CRISIL BB+/Watch Negative
 
Annexure - List of Entities Consolidated
Name of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Mumbai International Airport Ltd Full Consolidation Significant financial and operational linkages
Navi Mumbai International Airport Full Consolidation Significant financial and operational linkages
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  10300.00  CRISIL BB+/(Watch) Negative  20-05-20  CRISIL BB+/Watch Negative  17-10-19  CRISIL A-/Watch Negative  07-07-18  CRISIL A+/Stable    --  -- 
        24-03-20  CRISIL BBB/Watch Negative  28-08-19  CRISIL A/Watch Negative           
        20-02-20  CRISIL BBB+/Watch Negative  31-07-19  CRISIL A/Watch Negative           
            09-07-19  CRISIL A/Watch Negative           
            28-05-19  CRISIL A+/Stable           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Proposed Long Term Bank Loan Facility 10300 CRISIL BB+/Watch Negative Proposed Long Term Bank Loan Facility 10300 CRISIL BB+/Watch Negative
Total 10300 -- Total 10300 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

 Manish Kumar Gupta
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
manish.gupta@crisil.com

Ankit Hakhu
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
ankit.hakhu@crisil.com

Vinakshi Grover
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2143
Vinakshi.Grover@crisil.com 		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL