GMR to raise $350 million via bonds for Delhi airport expansion

Delhi International Airport Ltd, a GMR group company, plans to raise USD 350 million through 10 year senior secured bonds for the airport expansion programme and Moody's has assigned a Ba2 rating for the proposed bonds. Proceeds from the proposed bond would be used to help fund a major expansion to increase the passenger handling capacity of Indira Gandhi International Airport to up to 100 million passengers per annum, which the company expects would cost up to Rs 98 billion ( Rs 9800 crore) over a three-year development phase, Moodys said.

"Moody's Investors Service has assigned a Ba2 senior secured rating to Delhi International Airport Limited's (DIAL, Ba2 stable) proposed 10 year senior secured bond of up to USD350 million," the rating agency said. The proposed bond's Ba2 senior secured rating reflects the airport's strong market position and robust passenger traffic, which would likely grow at a high single-digit percentage per annum over the next 18 months under Moody's base case scenario, it said.

The rating agency however, said Delhi Airport's ratings are constrained by its planned capacity expansion, which would exert downward pressure on its financial metrics, the evolving regulatory environment in India and its obligation to pay 45.99 per cent of its revenue to the Airports Authority of India as a concession fee.

After accounting for the proposed USD notes, Moody's expects that DIAL's funds from operations/debt would remain weak over the next 2-3 years, with a very limited buffer above the minimum tolerance level of 3-4 per cent Moody's said. Moody's base case financial projections assume that aeronautical tariffs would stay at the current level during the third regulatory period between April 2019 and March 2024 and there was no material uplift to the airport's financial position arising from its arbitration proceedings with the Airports Authority of India on the calculation of the 45.99 per cent concession fee.

Despite its elevated leverage position, DIAL's liquidity position is strong, with cash holdings and short-term investments totaling Rs 2600 crore as in March 2019 and these assets provide the airport with additional financial flexibility over the next 12-18 months, the agency opined.

DIAL is the concessionaire for Indira Gandhi International Airport, under an Operations, Management and Development Agreement, entered into in 2006 with the Airports Authority of India.