S&P upgrades Delhi International Airport's rating to 'B+' from 'B'

Stronger Traffic and Profitability drives rating action

Global rating agency Standard and Poor’s (S&P) has upgraded Delhi International Airport Ltd’s (DAIL) long term issuer rating from “B” to “B+” on the back of stronger Traffic and Profitability. “B+” indicates the issuer may be vulnerable to adverse business but currently has the capacity to meet financial commitments.

The Outlook on rating is positive.

The robust traffic recovery and cash flow from contracted land monetization will collectively improve DIAL’s profitability and interest servicing ability, S&P said in a statement.

The airport operator's cash flow and financials could improve materially from higher tariffs likely in the next control period 4 (CP4) spanning April 1, 2024, to March 31, 2029. “We expect these to be implemented with a one-year delay (from April 1, 2025)”, the rating agency said.

The total traffic in fiscal 2024 could surpass pre-pandemic levels at 110%. Domestic passenger volume at DIAL fully recovered to pre-pandemic levels in fiscal 2023 at about 49.7 million passengers.

The positive outlook indicates that we may raise the ratings over the next 12-18 months if DIAL's ratio of operating cash flow (OCF) to debt increases to more than 7.0 per cent following the implementation of higher CP4 tariffs.

A solid passenger traffic recovery and higher profitability at about 30 per cent will also support stronger cash flows.

The agency said DIAL's profitability will improve on higher non-aeronautical revenue. The company's adjusted EBITDA margin recovered to about 30% over fiscal years 2024 and 2025, from an average of 20 per cent over the past two years. The robust traffic recovery and upcoming terminal expansion in September 2023 will lift non-aeronautical revenues.