Singapore, March 26, 2019 -- Moody's Investors Service ("Moody's") has affirmed GMR Hyderabad International
Airport Limited's (HIAL) Ba1 corporate family rating (CFR).
The outlook is negative.
RATINGS RATIONALE
The Ba1 rating reflects (1) Rajiv Gandhi International Airport's (RGIA)
strong market position and its strategic location in the city of Hyderabad,
(2) HIAL's low concession revenue share payment to the government,
and (3) the airport's strong operating performance relative to its
key performance targets, as stipulated by the concession.
These credit strengths, however, are offset by: (1)
the evolving nature of the regulatory framework in India (Baa2 stable),
which has resulted in lengthy delays in tariff determination and implementation,
and (2) HIAL's exposure to execution risks associated with the planned
expansion.
"The negative outlook reflects the company's weakening financial
profile under our base case scenario, which assumes that the lower
tariff outlined in the regulator's December 2017 consultation paper will
be implemented during the fiscal year ending 31 March 2020,"
says Spencer Ng, a Moody's Vice President and Senior Analyst.
Moody's expects HIAL's funds from operations (FFO)/debt to fall to the
mid-7% range during the fiscal year 2020. Such a
result would be below the minimum rating tolerance level of 8%
set for the company's rating.
"Our base case scenario does not incorporate any potential tariff increase
from the ongoing appeal related to tariffs for the previous control period,
absent which, the weakening trend in HIAL's credit metrics
will continue beyond fiscal 2020, as further debt is incurred for
the expansion," adds Ng.
A date for the appeal hearing has not yet been set.
Positive rating momentum is unlikely over the next 3-4 years,
because of the execution risks associated with the expansion, and
HIAL's elevated financial leverage.
However, the outlook could return to stable, if HIAL's financial
profile improves, such that FFO/debt is sustained above 8%
throughout the construction phase. Such an improvement would most
likely require a favorable outcome of the pending tariff appeal or if
the non-aeronautical business materially outperforms Moody's base
case expectation.
Moody's could downgrade HIAL's rating if there is further evidence
that the company's financial metrics will fall below the level considered
appropriate for its Ba1 rating category during the expansion. Evidence
of such a deterioration could include:
(1) The absence of clear progress in the tariff appeal process; or
(2) A reduction in HIAL's aeronautical and/or non-aeronautical
revenues relative to Moody's base case expectation.
The financial metrics that could indicate downward pressure on the rating
include FFO to gross adjusted debt declining below 8% on a consistent
basis.
Moody's could also downgrade the rating if: (1) there are material
missteps in the implementation of the expansion project, or (2)
there is an increase in equity distributions or related-party transactions
during the construction phase.
The principal methodology used in this rating was Privately Managed Airports
and Related Issuers published in September 2017. Please see the
Rating Methodologies page on www.moodys.com for a copy of
this methodology.
GMR Hyderabad International Airport Limited has a long-term concession
to operate the Rajiv Gandhi International Airport in Hyderabad under a
public-private partnership model. The airport is one of
the leading airports in India by passenger traffic.
The company started commercial operations on 23 March 2008.
The airport has a current design capacity of 12 million passengers per
annum. Equity in the company is held by GMR Airports (63%),
Malaysia Airports Holdings Berhad (11%, A3 stable),
the Government of India (Baa2 stable) through the Airports Authority of
India (13%), and the Government of Telangana (13%).
GMR Airports is a subsidiary of GMR Infrastructure Ltd.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Spencer Ng
Vice President - Senior Analyst
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077