Moody's downgrades Delhi International Airport ratings to B1 from Ba3

Moody's Investors Service has downgraded Delhi International Airport Ltd's (DIAL's) corporate family rating and senior secured ratings to B1 from Ba3.

It has also downgraded DIAL's baseline credit assessment to b1 from ba3. At the same time, Moody's has downgraded Cliffton Ltd's senior secured bond rating to B1 from Ba3.

The outlook on the ratings is negative.

The rating downgrade reflects adverse impact of reduced passenger traffic and airport revenue in the current fiscal year ending March 2022 due to surge in daily infection numbers since late March.

"We believe the consequent reduction in revenue will lead to additional debt being required to complete the airport's expansion and prolong the recovery in DIAL's financial metrics to a level consistent with a Ba rating," said Spencer Ng, Moody's Vice President and Senior Analyst.

DIAL is the concessionaire for the Indira Gandhi International Airport which is located in the political capital of India and operates under an operations, management and development agreement with the Airports Authority of India.

Cliffton Ltd is an orphan special-purpose vehicle established to facilitate a USD bond issuance. Proceeds from the transaction were used to subscribed to INR non-convertible debentures issued by DIAL which does not have any equity interest or management control in Cliffton Ltd.

Moody's said the negative outlook captures downside risks over the next 12 to 18 months, given material uncertainty in recovery of India's passenger traffic which will be heavily influenced by when travel restrictions are lifted and successful rollout of vaccines as outlined by the government.

Passenger traffic at the airport had likely fallen by more than 60 per cent in May from the February level. Given a large majority of DIAL's revenue is linked to airport traffic, Moody's expects revenue to fall in line with the drop in passenger numbers.

Whilst pandemic-driven revenue declines are not uncommon among rated airports, DIAL has limited capacity to offset reduced cash flow by cutting dividends or deferring its capital expenditure in a meaningful way under currently announced plans.

As such, Moody's expects the airport to need additional debt -- relative to previous forecasts -- in lieu of operating cash flow lost due to second coronavirus wave to complete its Rs 9,800 crore expansion.

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