Fitch downgrades Delhi International Airport to 'BB'; outlook negative

The agency also downgraded the ratings on senior unsecured notes of company to 'BB' from 'BB+'
Fitch Ratings has downgraded Delhi International Airport Ltd's (DIAL) Long-Term Issuer Default Rating (IDR) from "BB+" to "BB" on the sharp drop in volume in 2020 due to significant travel restrictions to curb the spread of the Coronavirus (Covid-19).

 
Fitch expects the recovery in traffic volumes to be prolonged. Weaker earnings and moderately flexible capex payments have resulted in DIAL's projected average Fitch-adjusted net debt/EBITDAR increasing to 10.0x. DIAL is part of GMR group which is into infrastructure sector.

 
The agency also downgraded the ratings on senior unsecured notes of company to 'BB' from 'BB+'. The outlook is 'negative'.
Although the Covid-19 pandemic has reduced passenger travel, infection rates in India have stabilised 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 re-imposition of travel restrictions.

 
Fitch's rating case does not assume annual fee payment to Airports Authority of India (AAI) from Q4FY21 till end-FY22. Any unfavourable 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 favourable 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", the rating agency added.

 
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 per cent of total traffic.

 
"We expect passenger travel to recover once the economy rebounds in the medium term, following a sharp drop due to the Covid-19 pandemic", Fitch said. The airport is located in the National Capital Region, which has a catchment population of over 22 million.


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