Singapore: Fitch Ratings said on Monday it has downgraded Delhi International Airport Ltd’s (DIAL’s) long-term issuer default rating (IDR) and the ratings on its outstanding senior unsecured notes to BB from BB-plus.
The outlook is negative, it added. The downgrade reflects a sharp drop in DIAL’s volume in 2020 due to significant travel restrictions to curb the spread of coronavirus.
Fitch said it expects the recovery in traffic volumes to be prolonged. Weaker earnings and moderately flexible Capex payments result in DIAL’s projected average Fitch-adjusted net debt/EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) increasing to 10 times.
Although the pandemic has reduced passenger travel, infection rates in India have stabilized and a domestic air traffic recovery is underway.
However, the negative outlook reflects the risk of an increase in infection rates that will lead to the re-imposition of travel restrictions.
Fitch’s rating case does not assume an annual fee paid to the Airports Authority of India (AAI) from the fourth quarter of the financial year ending March 2021 (FY21) till the end-FY22. Any unfavorable arbitration order could also put significant pressure on the ratings.
DIAL’s ratings are supported by its solid market position as operator and developer of Indira Gandhi International Airport, India’s largest airport by passenger traffic. The ratings are also supported by most of the airport’s traffic being origin and destination, as well as India’s favorable demographics and consumers’ increasing propensity to fly.
“We believe DIAL’s business strength supports its access to domestic banks and capital markets to address its short-term liquidity needs and refinancing plans,” said Fitch.
The airport is the largest international airport in India. It handled about 67 million passengers in FY20 with transit passengers making up only about 20 percent of total traffic. Growth is driven by India’s favorable demographics and local consumers’ increasing propensity to fly.
“We expect passenger travel to recover once the economy rebounds in the medium term following a sharp drop due to the pandemic. The airport is located in the National Capital Region which has a catchment population of over 22 million.