Moody's lowers Delhi International Airport's credit rating to Ba2; Outlook stable

Moody's Investors Service on Monday cut credit rating of DIAL, which operates the international airport in New Delhi, citing concerns over "cash flow generation" level.

Delhi International Airport Pvt Ltd's (DIAL) corporate family rating as well as senior secured ratings have been revised downwards to 'Ba2' from 'Ba1' while the outlook is stable. 'Ba' indicates substantial credit risk.

Moody's Vice-President and Senior Analyst Abhishek Tyagi said,"The downgrade reflects continued concerns about the level of cash flow generation".

This follows regulator AERA's previous tariff order, "which will see regulated revenues reduced materially over the 2015-19 regulatory period to levels that were not incorporated in our previous expectation", he said in a release.

The rating downgrade has also taken into account DIAL's new expansion programme that is planned over the next three to five years, which according to Moody's will "further pressure financial metrics".

Announced in December last year, the tariff order by the Airports Economic Regulatory Authority (AERA) will be applicable on DIAL over 2016-19.

It will lead to a substantial decrease in annual aeronautical revenue by around Rs 20 billion (Rs 2,000 crore), or about 70%, from 2018 fiscal year, Tyagi noted.

"This will also alter the revenue mix, with the proportion of higher risk non-aeronautical revenues increasing to a higher level than previously anticipated," he added.

The Airports Economic Regulatory Authority Appellate Tribunal (AERAAT) is reviewing the previous tariff order (covering the period 2010 to 2014).

Moody's said the stable outlook reflects DIAL's adequate liquidity.

Upward rating movement is unlikely in the near-term, given the planned expansion programme and the uncertainty associated with the regulatory process, it added.

DIAL is a three-way joint venture between GMR group, which is the majority stakeholder, the state-owned Airports Authority of India (AAI) and Germany's Fraport.