S&P Global Ratings has assigned a ‘BB’ long-term rating to Delhi International Airport’s (DIAL)’s proposed issue of rupee-denominated overseas bonds – known as masala bonds – and dollar-denominated bonds.
Delhi International Airport (DIAL) is a joint venture between the GMR Group (54%), the Airports Authority of India (26%) and investors Fragport AG and Eraman Malaysia, who own 10% each. The company plans to use the proceeds of this issue to refinance existing rupee loans and other external commercial borrowings.
According to market participants, the company is looking to refinance around Rs 3,000 crore of existing loans by raising funds through masala bonds. The masala bond issue is being viewed as a positive for the company since it would not involve any currency risk and would lengthen the company’s debt profile considerably.“We expect DIAL’s financial position to materially weaken in the fiscal year ending March 2018, from the current strong levels, before recovering. The extent of the weakening and the recovery will significantly depend on the tariff cuts by the regulator, DIAL’s capital expenditure (capex) for the next phase of growth, and the company’s payment structure for commercial property development,” S&P said in a release.The rating agency added that it expects greater clarity on DIAL’s aero revenues, capital expenditure, and property development plans by June 2018 and that cash over-recoveries would help support the company financially even though its commercial property development is slower than expected and there is possibility of a sharp cut in tariffs.“We expect DIAL to maintain its good market position and operating efficiency over the next two years at least. The company’s higher regulatory risk than that of its peers in the Asia-Pacific, concentrated revenue base, and weak profitability are likely to temper these strengths,” S&P said.