Moody's revises DIAL's ratings outlook to negative

Moody's today revised downwards the ratings outlook of DIAL, which operates the international airport here, to negative citing that implementation of the new tariff order would lead to lower revenues.
The outlook has been revised from stable while affirming DIAL's (Delhi International Airport Ltd) Ba1 corporate family rating and senior secured ratings.
The new tariff order from the Airports Economic Regulatory Authority (AERA), that would be applicable on DIAL over the 2016-2019 period, would lead to a decrease in annual aeronautical revenue by Rs 20 billion (Rs 2,000 crore) or around 70 per cent from 2017 fiscal year, Moody's Investors Service's Abhishek Tyagi said.

"Such decline, in the absence of countermeasures by DIAL, would lead to a weaker position relative to rating expectation," he said in a report.
"We also see ongoing uncertainty regarding future regulatory decisions, thereby raising the business risk for DIAL, and potentially leading to an overall credit profile that may not be consistent with the current Ba1 ratings," he noted.
Tyagi is Vice President - Senior Analyst Project & Infrastructure Finance at Moody's Investors Service Singapore Pte Ltd.

At present, the Airports Economic Regulatory Authority Appellate Tribunal (AERAAT) is reviewing the previous tariff order for the 2010-2014 period.
"The impact of the newly announced new order will only likely be known when the tribunal completes the review of the previous tariff order.

"While the duration and outcome of the tribunal review is not certain at this point of time, the potential for a final adverse outcome on DIAL's credit profile is meaningful," Tyagi said.
Operationally, DIAL's performance remains solid with the airport reporting a 16.4 per cent year-on-year growth in the first half of the current fiscal ending March 2016. This was mainly on account of 20 per cent rise in domestic passenger growth.
"DIAL's current liquidity position profile is adequate, with the free cash on hand of USD 170 million as of November 30, 2015 and a debt servicing requirement totalling only USD 14 million over next 12 months," the report said.

Moody's noted that the ratings could be downgraded if the tariff order is implemented, leading to the financial parameters deteriorating beyond its rating expectation.
AERA has ordered a steep 93 per cent reduction in Delhi airport charges. Interestingly, DIAL had sought 42.6 per cent hike in these charges.