Moody’s affirms Ba2 rating of GMR Hyderabad International Airport

Moody’s believes the revenue deferral and slower traffic recovery will lead to HIAL’s funds from operations (FFO) to remain negative over the next 12-18 months.

Moody’s Investors Service has affirmed GMR Hyderabad International Airport’s (HIAL) ‘Ba2’ corporate family rating (CFR) and ‘Ba2’ senior secured US Dollar bond ratings. The outlook on the ratings remains negative.

Spencer Ng, a Moody’s vice-president and senior analyst, said the rating affirmation is based on expectations of a gradual improvement in HIAL’s revenue over the next two-three years, driven by the implementation of higher tariffs under the final tariff order from April 2022, and a gradual recovery in passenger traffic and non-aeronautical businesses.

However, the ratings agency believes the headroom available for HIAL to manage any further downside risks have narrowed relative to previous expectations. “This is due to regulator’s decision to defer around `670 crore of HIAL’s regulated revenue to the next control period starting in April 2026, and the delay in passenger traffic recovery caused by the second wave of coronavirus cases in the June quarter of 2021,” said Ng.

HIAL has a long-term concession to operate the Rajiv Gandhi International Airport (RGIA) in Hyderabad under a public-private partnership model. HIAL is undertaking a major airport expansion that will cost Rs 5,500 crore (excluding interest during construction) with targeted completion before the end of 2022, the ratings agency said.

Moody’s believes the revenue deferral and slower traffic recovery will lead to HIAL’s funds from operations (FFO) to remain negative over the next 12-18 months. “Moody’s does not expect HIAL’s funds from operations to debt to recover above the minimum tolerance level until the year ending FY25.” Given the already extended recovery phase, any further delay in the recovery time frame will exert downward pressure on the rating.