Lenders to Mumbai International Airports (MIAL) face higher risks to their exposure as the GVK group-backed entity is facing liquidity pressure owing to delay in real estate monetisation (of 20-25 acres).
The repayment of loans of over Rs 250 crore against real estate deposits is due in the next few months. Rating agency CRISIL has downgraded MIAL’s bank facilities and non-convertible debentures from ‘AA’ to ‘A+’. The ratings have subsequently been placed on ‘Rating Watch with Negative Implications’. The downgrade reflects further delays in monetisation of real estate from previous expectations, which will result in lower liquidity than expected in the near term, CRISIL said. The cash availability at MIAL had reduced by March 31, 2019, primarily on account of up-fronting of investments in Navi Mumbai International Airport (NMIA), delay in refinancing of MIAL’s debt and higher capex. It had to incur higher upfront investments in NMIA in FY19 of Rs 905 crore against an expectation of about Rs 550 crore.
It was earlier expected that 20-25 acres of real estate monetisation would be near closure which will help shore up the liquidity levels within the first half of fiscal 2020.
However, based on the recent management discussions, the monetisation could be delayed further, CRISIL said. The firm has a strong business risk profile and a healthy land bank of 194 acres at this stage. The rating agency expects MIAL to successfully refinance the loans against real estate deposits in a timely manner.
Though MIAL has development rights for 194 acres, it has monetised only three parcels totalling around six acres.
MIAL has upcoming repayments of Rs 284 crore on September 1, 2019, and Rs 15 crore on August 31, 2019, on two loans against real estate deposits. Although MIAL has cash of over Rs 310 crore, this is largely encumbered towards operating payments. It had unutilised working capital of over Rs 220 crore as of June 30, 2019, but the usage of these funds for repayment of loans against real estate deposits needs approval of the project’s lenders.
MIAL is structured as an SPV and cash flows are ring-fenced.
Its liquidity is adequate to service project term debt obligations. MIAL is expected to have cash flow for debt servicing of more than Rs 1,300 crore in fiscal 2020 and more than Rs 960 crore in fiscal 2021.
It will have total debt obligetion (interest & principal repayment) on its debt facilities of Rs 1,087 crore in fiscal 2020 and Rs 870 crore in fiscal 2021.