Moody's downgrades Delhi airport credit rating

Moody's has downgraded Delhi International Airport Limited's (DIAL) credit rating to Ba2 from Ba1 in view of expected reduction in cash flow due to new tariff order by the Airport Economic Regulatory Authority (AERA). The rating outlook remains stable, Moody's Investor Service said on Monday.

Last December, the AERA reduced user charges by 89 per cent but its implementation has been stayed because of pending disposal of challenges against previous tariff orders.

"The downgrade reflects continued concerns about the level of cash flow generation following the regulator's order, which will see regulated revenues reduce materially over the 2015-2019 regulatory period to levels which were not incorporated in our previous expectation," said Abhishek Tyagi, Moody's vice president and senior analyst.

The rating downgrade takes in account Delhi airport's new expansion plans planned over next 3-5 years, which will put further pressure on financial metrics, Moody's said.

According to Moody's, implementation of the order will lead to a reduction in the airport's annual aeronautical revenue by around Rs 2000 crore from the financial year 2017-18. 

"This will also alter the revenue mix with the proportion of the high risk non-aeronautical revenues increasing to a higher level than previously anticipated. We also see ongoing uncertainty regarding future regulatory decisions thereby raising the business risk for DIAL to a level that was not incorporated in the previous rating," he added.