Moody's affirms stable outlook for Delhi Int'l Airport credit rating

Moody's Investors Service on Monday affirmed stable outlook for the credit rating of Delhi International Airport Ltd (DIAL), which is operating the aerodrome in the national capital. The agency has also affirmed DIAL's Ba2 corporate family rating and senior secured ratings, according to a release.

Spencer Ng, a Moody's Vice President and Senior Analyst, said the ratings affirmation principally reflects the expected growth in DIAL's revenue over the next 12-18 months. It is also underpinned by a sustained recovery in passenger traffic from the decline recorded in the first half of the fiscal year ending March 2020 and increasing contributions from its non-aeronautical businesses, Spencer added.

The rating outlook remains stable. However, the note said given the substantial funding required for the ongoing phase 3A expansion involving around Rs 9,800 crore, the agency expects funds from operations/debt to remain weak over the next two-three years, with a very limited buffer above the minimum tolerance level of 3-4 percent.

Moody's assumes aeronautical tariffs to remain at the current level during the third regulatory period between April 2019 and March 2024, but passenger traffic growth will grow in mid-single-digit in FY21 as one-off factors like suspension of Jet Airways gradually dissipate. The Indira Gandhi International Airport is under a Rs 9,800-crore expansion that will be completed over the next three-four years.

The GMR group-run airport is funding the expansion mostly from internal accruals, cash flow from operations and proceeds from the monetization of land parcels. Moody's expects passenger traffic to continue to recover from 5 percent decline seen in H1 of FY20 to high-single-digit over the medium-term, even though growth rate may be lower in FY21 due to continued softness in the global economy and the temporary hit from the coronavirus outbreak.

non-aeronautical revenue grew 6 percent in H1 of FY20 despite weak traffic thanks to better margins from duty-free sales and cargo. Further growth in non-aeronautical revenue will support more margin expansion-something critical to preserving its credit metrics," the report concluded.