Moody’s Investors Service (MIS) on Thursday cautioned that a sharp decline in passenger traffic could impact GMR-owned Delhi International Airport Ltd’s (DIAL’s) ability to preserve its credit profile while undertaking a debt-funded expansion plan.
DIAL will raise `9,800 crore to fund major expansion activities at IGI airport, including a new terminal building and a runway in the next three years.
Analysts at the credit rating agency noted that a prolonged dip in passenger footfall is credit negative for DIAL, and can put further pressure on its revenues.
"DIAL's credit metrics are already expected to be at the lower end of the range considered appropriate for its rating because of additional debt incurred to fund its major expansion programme and our base-case assumption that tariffs will remain at around the current low level," analysts said.
Most of DIAL's revenue, outside of income from land monetisation and rental, is linked to passenger and aircraft movements at the airport.
Passenger traffic at the IGI airport fell 15.3% year on year (yoy) and 10.5% yoy for April and May.
The dip in passenger footfall is a sharp turnaround from the average annual increase of 15% between 2016 and 2018. The agency said the decline in passenger traffic was primarily driven by the suspension of Jet Airways' operations on April 17 owing to financial crunch.
"Similar declines in passenger traffic are also recorded at other major Indian airports, although the extent of the decline was more acute in Delhi and Mumbai airports," it added.
In FY18, Jet Airways handled 16% of the domestic passengers and 14% of the international market. Moody’s, however, expects passenger traffic to grow at a high single-digit figure annually for DIAL over the next two-three years.