Delhi international airport plans to raise Rs 750 crore to refinance debt

Delhi International Airport Limited (DIAL) plans to refinance old debt by raising fresh funds up to Rs 750 crore via long-maturity debentures which carry lower interest rates.

The plan comes close on the heels of global rating agency Standard & Poor’s (S&P) upgrading DIAL’s long-term issuer rating from “B” to “B+” on the back of stronger traffic and profitability.

DIAL is a joint venture company sponsored by the GMR Group through its group company, GMR Airports Limited (64 per cent), in partnership with Airports Authority of India (AAI) (26 per cent) and Fraport AG Frankfurt Airport Services Worldwide (10 per cent).

India Ratings (Ind-Ra) has assigned “A+” rating for the company’s proposed non-convertible debentures (NCDs). It has also affirmed the existing ratings with a positive outlook.

The company was proposing to part-refinance the debentures due in October 2025 through the fresh issue of NCDs, which would have a bullet payment-- a lump sum payment made for the entirety of an outstanding loan amount, usually at maturity-- at the end of seven years.

DIAL expects the proposed refinancing to reduce interest costs and repayments in the near term, leading to an improvement in liquidity, Ind-Ra said.

DIAL’s net leverage (net debt/Ebitda) jumped significantly to 11.2x in FY23 from 5.8x in FY22 due to additional debt availed for capex and payment of revenue share in FY23. The leverage is expected to remain elevated until FY24 and moderate from FY25 on the implementation of the fourth control period tariff (FY25-FY29) and a ramp-up in traffic and non-aeronautical income.

The majority of the debt in DIAL has bullet maturities spread across FY26-FY31. The risk of the bullet payment for bonds/NCDs is mitigated by their laddered maturity over FY26-FY31. DIAL, a GMR group entity, has demonstrated refinancing capability during the peak of Covid-19 in 2021for bullet maturity—that requires the entire payment to be made rather than gradual payments over the life of the loan—due in 2022. The management’s confirmation on retaining accruals in DIAL, and the airport’s initial concession term until 2036, gives comfort.

The positive outlook reflects a strong recovery in traffic during FY23 to around 94% of the pre-Covid levels. The annual traffic is expected to surpass the pre-Covid levels in FY24, leading to a substantial improvement in Ebitda of about Rs 3,300 crore over FY24-FY25, as against an anticipated debt obligation of Rs 2,550 crore.