The outstanding amount of gross bank credit by Indian airports has doubled to ₹9,464 crore as of May 2021 compared to ₹4,519 crore last year, according to data put out by the Reserve Bank of India.
Industry experts believe that the increase in bank credit is because of many airports facing a cash crunch due to the Covid-19 pandemic. Some airports may have taken credit to undertake expansion activities as well.
The domestic passenger traffic, which had started seeing a steady ramp-up post resumption of airport operations from May 25, 2020, reaching 64 per cent of the previous year levels in February 2021, had again suffered a setback due to the second wave of restrictions.
Expansion projects
But at the same time, major airports have been undertaking significant expansion projects. In Bangalore, there was a runway expansion. Hyderabad, too, has come up with a new terminal, significantly upping its capacity targeting close to over 30 million passengers. Delhi, too, is coming up with a fourth runway.
Post FY19, the debt in the airport sector was expected to rise as most airports had initiated large capital expenditure (capex) to increase their capacity. As these airports started using their past accruals towards the initial capex requirements, the overall debt started rising during the last 12-18 months, Vishal Kotecha, Associate Director at India Ratings explained. Some airports may also avail additional debt to shore up their liquidity due to the uncertainty in traffic patterns leading to cash flow mismatches, the experts said.