The rating grade is now at BB- versus BB earlier in the high-yield segment.
“The downgrade reflects worse than Fitch expected traffic performance due to further travel restrictions because of the second coronavirus wave in India,” said Fitch in a report released Friday.
The rating company now expects a lengthier traffic recovery to pre-pandemic levels by end-2024 compared to end-2023, anticipated earlier.
Weaker earnings along with moderately flexible capex payments will result in forecast average Fitch-adjusted net debt/EBITDAR, remaining consistently above 20x over the medium term, under Fitch’s rating case.
The second wave of the virus has resulted in weakened air traffic performance. DIAL’s passenger traffic in May this year was just about 19% in the corresponding period in 2019 level, when it was not hit by the pandemic.
The passenger traffic for FY21 was 22.6 million. Fitch has assumed FY22 passenger traffic at 41 million while considering the rating action.
The risk of delays in revenue receipts from a commercial property being developed by Bharti Realty at the airport has also triggered the outlook revision.
“A timely receipt of this payment would help ease DIAL’s liquidity pressure and supporting deleveraging,” said Fitch.
DIAL had a cash balance of Rs 5,000 crore as of March 2021.
This includes Rs 3,300 crore from a bond raised in March this year. Nearly two-third of the proceeds will be used to repay an existing debt obligation coming up in February next year. The rest is meant for capex plans.
The rating agency also downgraded Cliffton Limited’s debt papers to ‘BB-‘, from ‘BB’, with a negative outlook.
Cliffton is an orphan financing vehicle incorporated in Mauritius for a US dollar bond issuance. The rating on the notes issued by Clifton reflects the consolidated credit profile of DIAL.
DIAL is a joint venture formed among GMR group, Airport Authority of India and Fraport AG & Eraman Malaysia.
