Moody's downgrades Delhi Airport's ratings to Ba3, places on review for further downgrade

Moody's Investors Service on Wednesday downgraded Delhi International Airport Ltd's (DIAL's) corporate family rating and senior secured ratings to Ba3 from Ba2.

At the same time, Moody's downgraded DIAL's baseline credit assessment to Ba3 from Ba2.

The ratings have also been placed on review for further downgrade. The outlook has been changed to rating under review from stable.

"The rating action reflects the worsening coronavirus outbreak and the increasingly stringent travel restrictions imposed both in India and globally, including ongoing measures introduced by the government," said Moody's.

"The downgrade to Ba3 reflects our expectation of a sharp decline in passenger and aircraft traffic at Delhi Airport in the coming months and the uncertainty over the timing and extent of a recovery, which coincides with increased debt issuance as the airport enters the peak stage of its Rs 9,800 crore expansion project," said Moody's Vice President and Senior Analyst Spencer Ng.

The confluence of these factors will severely weaken Delhi Airport's credit metrics, under Moody's base case scenario of DIAL continuing to levy the minimum tariff permitted under the base airport charge regime over the control period through to March 2024, with no ability to recoup lost revenue through tariff adjustments.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets.

Moody's said the combined credit effects of these developments are unprecedented. The airport sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment.

More specifically, the weaknesses in DIAL's credit profile, including its exposure to falling passenger traffic have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and DIAL remains vulnerable to the outbreak continuing to spread.

DIAL's Ba3 ratings continue to reflect the airport's strong market position and the fact that it predominantly caters to domestic travel, said Moody's.