Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AAA/Stable’ rating to the Rs 4,000 crore non-convertible debentures (NCDs) of Bangalore International Airport Limited (BIAL) and has reaffirmed its ‘Crisil AAA/Stable’ rating on the long-term bank facilities and existing NCDs of the company.

 

The rating continues to reflect the strong growth in non-aero revenue along with higher-than-expected growth in traffic for both, domestic and international passengers. The financial risk profile is expected to improve with proposed refinancing of debt of Rs 9,000 crore at a lower rate of interest and with longer tenure.

 

The rating also factors in the company’s financial flexibility because of presence of strong sponsor — Fairfax Financial Holdings Ltd (Fairfax; rated ‘BBB+/Positive’ by S&P Global Ratings). The rating is also driven by revision in the Crisil Ratings framework for mapping global scale ratings on the Crisil Ratings scale.

 

Crisil Ratings has taken into consideration BIAL’s proposed capital expenditure (capex) of Rs 15,000-16,000 crore over fiscals 2025-2029, to expand its capacity and accommodate higher traffic. The capex is likely to be funded through debt and equity in the ratio of 80:20. Bulk of the capex will be aeronautical (aero) in nature and BIAL will undertake capex after the requisite approvals and/or considerations from relevant stakeholders, including the Airport User Consultative Committee (AUCC). Therefore, BIAL is expected to generate aero revenue commensurate to the regulated return over this upcoming capex, in line with the business model.

 

The rating also factors in the diversified revenue profile of the BIAL group with structured returns on its regulatory asset base (RAB) under the hybrid till mechanism, strong market position as the operator of the largest airport in south India, and healthy financial profile with a ring-fenced financing structure. These strengths are partially offset by exposure to regulatory risks in the aviation industry.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of BIAL and its subsidiary, Bangalore Airport Hotel Ltd (BAHL), together referred to as the BIAL group, as BIAL has provided a corporate guarantee for the loans availed by BAHL for their entire tenure.

 

The rating factors in the financial flexibility derived from the presence of strong sponsor, Fairfax.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong market position as the operator of the largest airport in South India: BIAL operates the Kempegowda International Airport, Bengaluru, which is the third largest airport in India, and has capacity to handle 51.5 million passengers per year. Key growth drivers for traffic include the favourable demographics of Bengaluru, presence of a large information technology (IT) base, healthy office-space absorption and other related factors. As a result, passenger traffic grew ~12% on-year in fiscal 2025. The momentum is likely to sustain and healthy growth of 8-10% is expected over the next couple of years.

 

• Regulated returns in the form of aero revenue and healthy growth in non-aero revenue: Revenue is split between aero and non-aero streams. The former, which comprises passenger fees, landing and parking charges, is fairly stable. It is regulated by the Airports Economic Regulatory Authority (AERA), which allows for a stable return on aero assets and true-up of aero revenue.

 

The non-aero segment is well-diversified, with revenue from varied activities such as food and beverages, retail, duty-free shops, advertising and income from flight kitchens, car parking and ATM/forex services. Revenue rose ~45% on-year in fiscal 2025, supported by higher traffic. The company clocked non-aero revenue of Rs 1,029 crore in fiscal 2025, against Rs 801 crore in fiscal 2024, driven by higher-than-anticipated growth in lounge and duty-free segments and additional monetisation opportunities in retail and food and beverages segments, with commencement of Terminal 2 operations.

 

Continued growth in non-aero revenue will be aided by influx of international passengers, strong and exclusive partnerships with global brands and measures to develop the Bengaluru airport as an alternative hub for airlines in south India. Furthermore, BIAL has provided space to airlines to develop maintenance, repair and overhaul (MRO) services to carriers, resulting in an increase layovers at BIAL for overnight carriers

 

• Healthy debt metrics over debt tenure and financial flexibility: Revival in traffic, along with growth in aero revenue from the third control period (CP 3) tariff order, and restoration of non-aero revenue should help BIAL maintain a comfortable debt service coverage ratio over the debt tenure till fiscal 2040. BIAL also has the right to develop about 400 acres of land around the airport, which will enhance its revenue potential.

 

• Strategic importance to, and presence of a strong sponsor, Fairfax: Fairfax, which holds 74% stake in BIAL, is one of the largest global property and casualty reinsurers with $33.9 billion in gross premiums written (GPW) in 2024 with an investment portfolio of $70 billion. BIAL remains strategically important to Fairfax and the rating on BIAL factors in financial flexibility from the presence of the strong sponsor.

 

Weaknesses:

• Exposure to regulatory risk: The regulatory regime for domestic airport operators is evolving. Although developers have largely benefitted from regulations in recent years, they do face risks associated with regulatory uncertainty. Appropriate and timely true-ups for lower traffic and approval for cost overrun for capex, if any, are open risks currently.

 

This was seen in the tariff order for CP 3 (April 1, 2021, to March 31, 2026), which was released in August 2021. It provided BIAL lower aero revenue by around Rs 940 crore within CP 3, by delaying/holding the tariff ramp-up. The authority also reduced tariff rates in the fourth quarter of fiscal 2026. Additionally, BIAL has been accorded lower allowance of operating expenses (around Rs 2,670 crore over CP 3) against its representation of around Rs 5,160 crore (as per the consultation paper).

 

• Exposure to risks associated with large expansion plans: BIAL is expected to undertake large expansion worth Rs 15,000-16,000 crore over fiscals 2025-2029 to enhance capacity for catering to a growing passenger traffic. BIAL would remain exposed to the risk of disallowance of certain cost and capex as pass-through in tariff.

Liquidity: Superior

BIAL has cash and equivalent of around Rs 3,141 crore as on March 31, 2025, of which Rs 2,545 crore is unencumbered, against low debt obligation in fiscal 2026. Additionally, the company has a working capital line of Rs 50 crore, which can be used for meeting operating expenses under adverse circumstances. The capex is expected to be funded through drawdown of additional debt. BIAL also derives financial flexibility from the presence of strong sponsors (with Fairfax being the largest shareholder), having a long-term strategic view and strong financial profile.

Outlook: Stable

The overall revenue of BIAL is expected to grow, driven by growth in passenger traffic, strong market position and increasing non-aero revenue.

Rating sensitivity factors

Downward factors:

• Material deterioration in air traffic and non-aero revenue in fiscal 2026 (compared to current expectation of 44 million PAX and around Rs 1,038 crore of non-aero revenue).
• Fall in liquidity cover below four months of debt servicing and operating expenses.
• Debt-funded capex leading to material deterioration in debt protection metrics

About the Company

BIAL, sponsored by a consortium comprising Fairfax (74% holding), Airports Authority of India (AAI; 13% holding) and Karnataka State Industrial and Infrastructure Development Corporation (KSIIDC; 13% holding), is the developer-operator of the greenfield international airport at Bengaluru, under a 30-year concession (extended for further 30 years by BIAL), awarded by the Government of India starting from 2008. It has an annual design capacity of 5.15 crore (based on the number of passengers that can be handled in peak hours), including the new Terminal 2. BAHL is the developer of the hotel situated near the Kempegowda International Airport. The hotel, being operated by the Taj group, commenced operations in October 2016.

Any other information: Not Applicable