Moody's affirms Hyderabad Airport's Ba2 rating, negative outlook

Moody's Investors Service has affirmed GMR Hyderabad International Airport Ltd's (HIAL's) Ba2 corporate family rating (CFR) and Ba2 senior secured USD bond rating.

The outlook on ratings remains negative.

"The rating affirmation reflects our expectation of a gradual improvement in HIAL's revenue over the next two to three, driven by the implementation of higher tariffs under the final tariff order from April 2022, and a gradual recovery in passenger traffic and non-aeronautical businesses under our base case," said Spencer Ng, a Moody's Vice President and Senior Analyst.

"Nevertheless, the headroom available to HIAL to manage any further downside risks have narrowed relative to our previous expectation. This is due to the regulator's decision to defer around Rs 670 crore of HIAL's regulated revenue to the next control period starting in April 2026, and the delay in passenger traffic recovery caused by the second wave of coronavirus cases in the June 2021 quarter," added Ng.

HIAL has a long-term concession to operate the Rajiv Gandhi International Airport (RGIA) in Hyderabad under a public-private partnership model. The company is undertaking a major airport expansion that will cost Rs 5,500 crore (excluding interest during construction) with targeted completion before the end of 2022.

After factoring in the revenue deferral and slower traffic recovery, HIAL's funds from operations (FFO) will likely remain negative over the next 12 to 18 months.

Moody's said it does not expect HIAL's FFO/debt to recover above the minimum tolerance level until the year ending March 31, 2025 (fiscal 2025). Given the already extended recovery phase, any further delay in the recovery time frame will exert downward pressure on the rating.

The negative outlook reflects potential downside risks over the next 12 to 18 months that could stem from a slower-than-expected recovery in the airport's traffic and the airport's very limited financial headroom to manage further downside risks.

The airport has a current design capacity of 12 million passengers per annum. Equity in the company is held by GMR Airports (63 per cent), Malaysia Airports Holdings Berhad (11 per cent), the Airports Authority of India (13 per cent) and the Government of Telangana (13 per cent).

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