DIAL planning to raise $350 million to fund airport expansion

The planned expansion is going to cost Rs 98 billion (Rs 9,800 crore) and will be completed over a period of three years, ratings agency Moody said

New Delhi: GMR Group company's Delhi International Airport Ltd is planning to raise $350 million through 10 year senior secured bonds to fund the airport's expansion programme. Proceeds from the bond will be used by the company to improve the passenger handling capacity of Indira Gandhi International Airport and push it to 100 million passengers per annum. The expansion is going to cost Rs 98 billion (Rs 9,800 crore) and will be completed over a period of three years.

Moody gives Ba2 rating to proposed bonds

Moody has given a Ba2 rating for the proposed bonds. "Moody's Investors Service has assigned a Ba2 senior secured rating to Delhi International Airport Limited's (DIAL, Ba2 stable) proposed 10 year senior secured bond of up to $350 million," the rating agency said.

The rating shows the robust position that the airport occupies in the market. Delhi airport is India's busiest airport and its passenger traffic is expected to grow at a high single-digit percentage per annum over the next 18 months under Moody's base case scenario, Moody said.

'Constraints remain'

The ratings agency, however, added that the planned expansion, along with the evolving regulatory environment in India and DIAL's obligation to pay 45.99 percent of its revenue to the Airports Authority of India (AAI) as concession fee, will also exert downward pressure on the airport's financial metrics. This, in turn, would have an impact on the airport's ratings.

Moody also expects DIAL's funds from operations/debt to remain weak over the next 2-3 years, with a very limited buffer above the minimum tolerance level of 3-4 percent.