Ind-Ra places DIAL's bank loans on rating watch negative

India Ratings and Research (Ind-Ra) on Friday placed Delhi International Airport Ltd's (DIAL's) bank loan ratings on rating watch negative (RWN).

The RWN reflects the uncertainty regarding the impact on passenger traffic owing to the visa curbs, complete embargo on international flights from March 22 and a reduction in domestic travel due to the outbreak of COVID-19.

Ind-Ra said it will monitor the effect of the same on DIAL's cash flows and liquidity.

DIAL's overall passenger volumes fell one per cent year-on-year for the first 11 months of the current financial year (11M FY19: growth of 9.6 per cent) due to Jet Airways' closure of operations and a slowdown in economic activity.

International passenger load factor fell to 78.2 per cent in 11M FY20 (11M FY19: 81.7 per cent) and is further likely to fall subsequent to the visa curbs travel in March and embargo on international flights.

Ind-Ra said it believes COVID-19's impact on the passenger load factor is likely to show from March.

International passengers, who account for 28 per cent of DIAL's total passengers, contribute nearly 28 per cent to its aeronautical revenues.

Non-aero revenues contribute to around 70 per cent of DIAL's overall revenues, of which 25 per cent is directly linked to international passengers while 35 per cent is linked to overall traffic at the airport and the balance 55 per cent to be received from lease rentals and advertisement revenues.

While the loss in aeronautical revenues and non-aeronautical revenues will impact near-term cash flows and liquidity, long-term returns are largely likely to be protected as 100 per cent of aeronautical revenue and 30 per cent of non-aeronautical revenues will be trued up during the tariff determination under the current control period for which the tariff order is pending, or the subsequent control period which will start in FY25.

At February-end, said Ind-Ra, the company had overall liquidity of Rs 1.4 crore excluding the project debt funds of Rs 3,000 crore. The company has a monthly debt obligation of around Rs 48 crore and an operating cost of around Rs 90 crore.

The liquidity to monthly obligations (debt servicing plus operating cost) is 10 times without any cash generation. Ind-Ra said it will monitor the extent of liquidity and the cash generation until the impact of COVID-19 is neutralised.

DIAL had already incurred a capex of Rs 2,700 crore at February-end against the overall capex of Rs 10,550 crore planned till FYE22.

The company has adequate liquidity to meet the capex obligation for the ensuing 12 months and is yet to avail additional debt of over Rs 2,000 crore to fund the balance obligation.

Receipt of Rs 1,500 crore from Bharti Realty Limited over the ensuing three months against the monetisation of real estate assets in FY20 will further support capex funding.