| Bangalore International Airport Limited | ||||||||
| Rating upgraded to 'CRISIL AA+/Stable' | ||||||||
| Rating Action | ||||||||
| ||||||||
| ||||||||
| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||||
| 1 crore = 10 million | ||||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the bank facilities and non-convertible debentures of Bangalore International Airport Limited (BIAL) to ‘CRISIL AA+/Stable’ from ‘CRISIL AA/Stable’.
The rating upgrade factors in strong recovery of traffic and non-aeronautical revenues better than Crisil Ratings expectations and overall improvement in risk profile of airport operators. Passenger traffic for fiscal 2023 stood at 98.6% of pre-covid levels (FY2020) at 32 million. Traffic for the first quarter of fiscal 2024 was 9.6 million, registering 14.3% growth over corresponding period of fiscal 2020, higher than all India average. Healthy double-digit growth is expected in traffic for fiscal 2024. Further, non-aero revenue for the fiscal 2023 recorded a healthy 19% growth over pre-covid levels in fiscal 2020 despite lower traffic numbers. BIAL registered a healthy uptick in non-aero revenue per pax with Q1 FY2024 standing at Rs. 258 per pax, up from Rs. 157 per pax pre-covid (FY2020). The strong recovery across traffic post Covid-19 disruptions and commencement of operations at the new terminal, cements confidence on the 11-14% p.a. traffic growth and 10-14% p.a. non-aero revenue growth over the next 2-3 years.
Risk profile for airports sector has improved post covid demonstrated through healthy financial flexibility in continued debt and equity capital availability for the overall sector. This conducive capital availability was also seen for BIAL in its raise of over Rs 1,650 crore of debt capital from domestic markets in fiscal 2022 & fiscal 2023 at competitive rates.
The rating continues to factor in the BIAL group's diversified revenue profile 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 ring-fenced financing structure. The presence of strong sponsors (with Fairfax being the largest shareholder) continues to provide comfort. These strengths are partially offset by exposure to project implementation and regulatory risks. The pending capex will be largely funded through drawdown of sanctioned debt and, hence, liquidity is expected to remain strong. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of BIAL and its subsidiary, Bangalore Airport Hotel Ltd (BAHL), as these entities, together referred to as the BIAL group, are commonly managed and have significant financial linkages.
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:
Lockdowns, restrictions on movement of people and overall economic slowdown had impacted the traffic with BIAL handling only 11 million passengers in fiscal 2021 against 32 million in fiscal 2020. Traffic recovered in fiscal 2022 to touch 16.3 million passengers (49% increase from fiscal 2021) and 32 million passengers (98.6% of fiscal 2020) in fiscal 2023. Strong market position within a defined catchment area is expected to restore passenger volumes and healthy growth as seen in the past. Further, revival in the economy and corporate travel is likely to provide a growth of 10-15% in fiscal 2024 (over fiscal 2023 volumes).
The non-aero revenue segment is well-diversified, with revenue from varied activities such as food and beverages, retail, duty-free shops, advertising and incomes from flight kitchen, car parking and ATM/forex services. This segment, which remains largely unregulated, grew at compound annual rate of over 20% during the last three fiscals till 2020 and contributed to nearly 38% of total revenue in fiscal 2020. Additionally, BIAL also has the right to develop about 462 acres of land around the Bengaluru airport, enhancing its financial flexibility.
The financial flexibility of BIAL is further supported by the presence of strong sponsors (with Fairfax being the largest shareholder) having long-term strategic view and strong financial profile.
Weaknesses:
This was seen in the recent tariff order for CP 3 (April 1, 2021 to March 31, 2026) which was released in August 2021. It provided BIAL lower aeronautical revenue by ~Rs 940 crore within CP 3 by delaying/ holding ramp-up in tariffs. The authority also reduced tariff rates in the fourth quarter of fiscal 2026. Additionally, BIAL has been given lower allowance of operating expenses (approved Rs ~2,670 crore over CP 3 tenor) against BIAL representation of Rs ~5,160 crore (as per the consultation paper). |
Liquidity: Strong BIAL has unencumbered cash and equivalent of ~Rs 1,200 crore as on June 30, 2023. Additionally, the company has working capital line of Rs 50 crore, which can be used for meeting operating expenses in adverse circumstances. The company has low debt obligation over fiscals 2024. It is expected that capex would be met through drawdown of additional debt. The financial flexibility of BIAL is further supported by the presence of strong sponsors (with Fairfax being the largest shareholder) having long-term strategic view and strong financial profile. |
Outlook: Stable BIAL will benefit from ramp up in overall revenue, driven by a strong market position and growth in passenger traffic |
Rating Sensitivity factors Upward factors:
Downward factors:
|
About the Company BIAL, sponsored by a consortium comprising Fairfax (57% holding), Siemens Project Ventures GmbH (17%), 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 period of 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 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 is being operated by the Taj group and has commenced operations from October 2016. |
Key Financial Indicators (CRISIL Ratings-adjusted numbers)
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
|
Criteria Details
|