Delhi International Airport to raise up to Rs 1,600 cr via debentures

Tweaks plans to opt for Debentures as alternative to lease financing

In tweaking of fund raising plans, Delhi International Airport Limited (DIAL), a GMR group entity, will raise upto Rs 1,600 crore through Debentures to finance balance capital expenditure for capacity expansion by September 2023. Till end of August 2022, had incurred Rs. 7,765 crore of the project cost.

The pending project cost of Rs 3,785 crore is expected to be funded through the proposed NCDs (alternative to lease financing loan), real estate security deposits (RSDs) and cash in hand earmarked for project.

DIAL is currently undertaking a large capital expenditure (capex) programme to increase the passenger capacity to 100 million by September 2023. The capex timeline has been revised to September 2023 from June 2022 because of the COVID pandemic.

Given the significant decline in internal accruals owing to the Covid-19 disruptions in FY2021 and FY2022, the company raised additional debt through the issuance of bonds in March 2021 and June 2022.

Icra has assigned "A+" rating with outlook positive for proposed Non-convertible Debentures (NCD). The rating agency also affirmed "A+" rating for exisiting working capital limits, debentures and non-fund based limits and revised outlook revised from 'Stable' to 'Positive' from Stable.

The outlook revision to Positive on the long-term rating reflects expectation that the credit profile of the company is likely to witness improvement in the near to medium term in the backdrop of ramp-up in traffic.

The ratings continue to derive strength from the significant competitive advantage enjoyed by DIAL, given the dominant position of the Indira Gandhi International Airport (IGIA) as the largest Indian airport in terms of passenger traffic. Any significant cost overruns in the ongoing capex or a material disallowance of capex cost by the the Airports Economic Regulatory Authority of India (AERA) will be a credit negative, ICRS said.

With large bullet repayments falling due in FY2026 (Rs 3,257 crore), FY2027 (Rs 3,494 crore), FY2028 (Rs 1,000 crore) and FY2030 (Rs 3,500 crore), DIAL remains exposed to high refinancing risks.

The recent Supreme Court ruling regarding calculation of tax pertaining to aeronautical services provides benefit to DIAL. At present, while calculating tax pass through, the Airports Economic Regulatory Authority of India (AERA) considers annual fee related to aero revenue as a part of expenses.

However, the Supreme Court has ruled that annual fee related to aero revenue should not be a part of expenses to calculate aeronautical profit in line with the terms of Operation, Management and Development Agreement (OMDA). This ruling is expected to result in significant additional cash inflows to DIAL in April 2024 to March 2029 period leading to improved cash flow from operations.

Icra expects ramp-up in the overall passenger traffic to 93-94 per cent of the pre-Covid level, and non-aeronautical (non-aero) revenues to pre-Covid level in FY2023 for DIAL. During 5M FY2023, the company’s passenger traffic recovery stood at 92 per cent of the pre-Covid level (similar period in 5M FY2020). This improvement came on the back of resilient domestic passenger traffic and healthy ramp-up in international passenger traffic post resumption of international commercial operations from March 27, 2022 after a two-year ban.

The improvement in traffic, non-aero revenues, and favourable ruling on aeronautical tax pass through, will result in significant improvement in its debt coverage metrics for the residual concession period, Icra said.