A baggage truck drives past the newly inaugurated Terminal 2 building at the Indira Gandhi International Airport (IGI) in Delhi. (Photographer: Anindito Mukherjee/Bloomberg)

GMR To Raise $350 Million Via Bonds To Fund Delhi Airport Expansion

GMR Group’s Delhi International Airport Ltd. plans to raise $350 million through ten-year, senior-secured bonds for expansion of the Delhi airport. Moody’s Investors Service Inc. has assigned a ‘Ba2’ rating for the proposed bonds.

Proceeds from the fundraising will be used to increase passenger handling capacity at the Delhi airport to up to 10 crore passengers per annum, an expansion that’s expected to cost to up to Rs 9,800 crore over a three-year period, Moody’s said.

"Moody's has assigned a Ba2 senior secured rating to Delhi International Airport Ltd.'s (DIAL, Ba2 stable) proposed 10-year senior-secured bond of up to $350 million," the ratings agency said.

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The proposed bond's Ba2 senior-secured rating reflects Delhi airport's strong market position and robust passenger traffic, which would likely grow at high single-digit percentage per annum over the next 18 months under Moody's base case scenario.

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

After accounting for the proposed dollar notes, Moody's expects that Delhi airport's funds from operations and debt would remain weak over the next two to three years, with a very limited buffer above the minimum tolerance level of 3-4 percent, 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 Airports Authority of India on the calculation of the 45.99 percent concession fee.

Despite its elevated leverage position, DIAL's liquidity position is strong, with cash holdings and short-term investments totaling Rs 2,600 crore as in March 2019 and these assets provide the airport with additional financial flexibility over the next 12-18 months, Moody’s noted.

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.

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