CRISIL lowers outlook on Adani Airport Holdings from 'stable' to 'negative'

CRISIL Ratings has revised its outlook on Adani Airport Holdings Ltd (AAHL) from "stable" to "negative".

The outlook revision indicates that the standalone credit profile of AAHL may weaken. This was due to lower traction in non-aero revenue per passenger (pax) year-to-date (YTD) in fiscal 2023 and increased regulatory risk on the proposed commercial structure for non-aeronautical revenue.

Lower than expected traction in non-aeronautical revenue of Rs 750-800 crore (CRISIL Ratings' expectation) in fiscal 2024 will be a negative rating trigger.

The rating agency affirmed a long-term rating of "A" for the Adani group entity.

CRISIL said regulatory risk has increased as AAHL had proposed a commercial structure of providing non-aeronautical services to airports through its holding company at a minimum guaranteed fee or a certain percentage of revenue share, whichever is higher. This has not been approved in the recent tariff orders received for Ahmedabad and Mangalore airports. But the airport operators have appealed against these tariff orders in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). Any negative or delayed outcome in TDSAT (beyond the calendar year 2023) will worsen the debt servicing capabilities and be a key rating sensitivity factor.

The rating continues to reflect the strong managerial and operational expertise available with the company as part of the Adani group. Ratings also factor in its healthy regulated business model, providing certainty to aero revenue and locational advantage within the established catchment area of assets, paving the way for a ramp-up in non-aero revenue.

The strengths are partially offset by exposure to implementation and regulatory risks associated with the other four tariff orders and a modest financial risk profile, which is susceptible to a ramp-up in non-passenger revenue in the long term.