Moody's Investors Service on Monday affirmed Delhi International Airport Limited's (DIAL) Ba2 corporate family rating and senior secured ratings.
The ratings outlook remains stable, it said.
"The ratings affirmation principally reflects the expected growth in DIAL's revenue over the next 12 to 18 months, underpinned by a sustained recovery in passenger traffic from the decline recorded in the first half of the fiscal year ending March 2020 and increasing contributions from its non-aeronautical businesses," said Spencer Ng, a Moody's Vice President and Senior Analyst.
"These factors should help keep DIAL's financial metrics above the minimum tolerance level set for its rating."
However, given the substantial funding requirement for its major phase three A expansion, Moody's expects DIAL's funds from operations and debt to remain weak over the next two to three years with a very limited buffer above the minimum tolerance level of three to four per cent.
Moody's financial projections assume that aeronautical tariffs will remain at the current level during the third regulatory period between April 2019 and March 2024, and passenger traffic growth will improve to the mid-single-digit percentage range in fiscal 2021 as one-off factors such as suspension of Jet Airways gradually dissipate.
DIAL is undertaking a major expansion of its Indira Gandhi International Airport, which is expected to cost about Rs 9,800 crore and take about three to four years to complete.
To fund the expansion, DIAL will rely on its substantial cash on hand, cash flow from operations, proceeds from the monetisation of land parcels as well as incremental debt.
As such, the airport's financial profile over the expansion period will also be driven by its ability to monetize additional land parcels to help support its expansion funding requirements.
Challenges in this regard will likely result in additional debt needed to complete the expansion, which would exert additional pressure on the airport's financial profile.
DIAL is the concessionaire for Indira Gandhi International Airport and operates under an operations, management and development agreement concluded in 2006 with the Airports Authority of India.
The concession is for a 30-year period and DIAL has the option to extend it for another 30 years, subject to the company meeting defined performance criteria.
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