Detailed Rationale

Crisil Ratings has reaffirmed its rating on the long-term bank facilities of GMR Hyderabad International Airport Limited (GHIAL) at ‘Crisil AA+/Stable’.

 

The rating reaffirmation factors in healthy traffic growth of 19% and 16% for fiscal 2024 and 11MFY25 respectively, in line with expectations. This has resulted in passenger traffic estimated to reach ~29 million in fiscal 2025. Also, non-aero revenue for fiscal 2024 and 9M-FY25 stood at Rs 542 crore and Rs 447 crore respectively, recording a y-o-y growth of 22% and 12% respectively. This has been supported by increased passengers’ volume as well as higher per passenger spending. Further, Crisil Ratings expects healthy growth momentum to continue for the company, with passenger traffic expected to reach ~33.5 million passengers and non-aero revenue expected to be Rs 700-750 crore, respectively, for fiscal 2026.

 

This results in healthy operating cash flows, in turn supporting strong debt coverage ratios as well as liquidity profile. Further, with the completion of capex for capacity expansion to 34 million passengers, the recovery of the same through tariff order, the company is focusing on reducing the leverage (ratio of gross debt to ebitda), which is estimated at 6.2 times as on March 2025 (was 7.5 times as on March 2024). Crisil Ratings has taken note of the management guidance to reduce leverage (net debt to EBITDA) to below 4 times over the medium term and the same will be a key rating sensitivity factor.

 

The rating continues to reflect the company’s diversified revenue profile with structured returns on its regulatory asset base (RAB) under the hybrid till mechanism, strong position as an exclusive operator of the Rajiv Gandhi International Airport (RGIA) at Hyderabad, and above-average financial profile with ring-fenced financing structure. These strengths are partially offset by exposure to project implementation and regulatory risks.

Key Rating Drivers & Detailed Description

Strengths:

Diversified revenue profile with regulated returns under the hybrid till mechanism: The company has a regulated revenue profile, which provides for fixed returns on RAB and upside potential on 70% of the non-aero revenue under the hybrid till mechanism. Nearly 68% of revenue in fiscal 2024 was in the form of aero charges regulated by the Airports Economic Regulatory Authority (AERA) of India. Regulation provides for true up of aero revenue, in case of any variation in traffic or change in capital expenditure (capex), aero operating expense and aero tax. This lends stability to the company’s revenue base. There exists track record of true ups allowed in the past pertaining to operating expenses/capex/ARR on actuals.

 

Lockdowns, restrictions on movement of people and overall economic slowdown had impacted the traffic with GHIAL handling only 8 million passengers in fiscal 2021 against 21.6 million in fiscal 2020. Traffic recovered in fiscal 2022 to touch 12.4 million passengers (55% increase from fiscal 2021), 21 million passengers (97% of fiscal 2020) in fiscal 2023 and 25 million passengers (116% of fiscal 2020) in fiscal 2024. Traffic in FY25 stood at ~29 million. Strong market position within a defined catchment area is expected to restore passenger volumes and healthy growth as seen in the past. Furthermore, revival in the economy and corporate travel is likely to provide a moderate growth of 10% in fiscal 2026 (over fiscal 2025 volumes).

 

Strong position as the operator of the RGIA: RGIA is the sixth largest airport in the country in terms of passengers handled with a total of ~25 million in fiscal 2024 and ~29 million in FY25. The airport is favourably located with major domestic and international destinations being within a flying radius of 2-5 hours. This is expected to help develop the airport as an aero hub for both passengers as well as cargo, in the long run. Furthermore, as per the concession agreement, GHIAL has an exclusivity right that no new airport shall be permitted by the government within an aerial distance of 150 kilometre before the 25th year of its operations (2033). The favourable location and growing economy of Hyderabad are expected to ensure healthy growth in traffic over the medium term.

 

Strong financial profile with a ring-fenced structure: GHIAL is structured as a special purpose vehicle and is ring-fenced from its parent, the GMR group. The financial profile is expected to be strong as seen from expected average debt service coverage ratio (DSCR) under Crisil Ratings’ sensitised projections. Furthermore, the board level representation of the Airports Authority of India (AAI; rated ‘Crisil AAA/Stable’) and the Government of Telangana, as well as the presence of an escrow account with a payment waterfall mechanism, ensures priority of debt repayment. Liquidity is expected to be sufficient for meeting the obligation towards equity contribution for future capex and for requirements of the subsidiaries. Additionally, GHIAL has distributed a surplus of Rs. 283 crores in FY25 and has projected a dividend distribution plan for forthcoming years. According to management, dividend will be distributed only post meeting debt obligations, operational and capex requirements and minimum internal liquidity. Any deviation from this expectation, most likely, excess dividend distribution by GHIAL to its promoters, will be a rating sensitivity factor.

 

Weaknesses:

Risks related to proposed capacity expansion: The regulatory regime for domestic airport operators is evolving. Although regulations have been largely favourable for the developers in recent years, some risks associated with regulatory uncertainty persist.

 

This was seen in tariff order for CP 3 (April 1, 2021, to March 31, 2026), which was released in August 2021. GHIAL lower aeronautical revenue by ~Rs 669 crore within CP 3 by delaying/ holding ramp up in tariffs (expected to be recovered in CP 4 with carrying costs). The authority has also reduced tariff rates in the fourth quarter of fiscal 2026. Additionally, GHIAL has been given lower allowance of operating expenses (approved Rs ~2,529 crore over CP 3 tenure) against expectations. Further, GHIAL has received favourable order from Telecom Disputes Settlement and Appellate Tribunal (TDSAT) in considering the deferred revenue and capex of CP3, as part of tariff computation of CP4. However, AERA has appealed against the TDSAT order in the Supreme court and is currently sub-judice.

 

Risks related to regulatory regime: The regulatory regime for domestic airport operators is evolving. Although regulations have been largely favorable for the developers in recent years, some risks associated with regulatory uncertainty persist.

 

This was seen in tariff order for CP 3 (April 1, 2021, to March 31, 2026), which was released in August 2021. GHIAL lower aeronautical revenue by ~Rs 669 crore within CP 3 by delaying/ holding ramp up in tariffs (expected to be recovered in CP 4 with carrying costs). The authority has also reduced tariff rates in the fourth quarter of fiscal 2026. Additionally, GHIAL has been given lower allowance of operating expenses (approved Rs ~2,529 crore over CP 3 tenure) against expectations. Further, GHIAL has received favourable order from Telecom Disputes Settlement and Appellate Tribunal (TDSAT) in considering the deferred revenue and capex of CP3, as part of tariff computation of CP4. However, AERA has appealed against the TDSAT order in the Supreme court and is currently sub-judice.

Liquidity: Strong

Crisil Ratings expects annual net cash accruals to be ~Rs. 1100 crore in fiscals 2026. Further, Liquidity and accruals are sufficient to meet debt servicing requirements, operating expenses and capex. GHIAL has cash and equivalent of around Rs 1,040 crore, exclusive of Rs 150 crore of undrawn working capital demand loan (WCDL) as on January 31, 2025. The company has a bullet debt repayment of Rs. 2000 crore due in February 2026, which is expected to be refinanced in a timely manner. The company’s past track record in refinancing debt in a timely manner provides comfort against the same.

Outlook: Stable

GHIAL will benefit from a ramp up in overall revenue, driven by a strong market position and growth in passenger traffic.

Rating sensitivity factors

Upward factors

• Material and sustainable improvement in leverage most likely because of higher non-aero revenue (against base case expectation of ~Rs. 740 crore over fiscal 2026)
• Material improvement in capital structure leading to improvement in the financial profile in the long term

 

Downward factors

• Material deterioration in air traffic (compared to current expectation of 33.5Mn pax) and non-aero revenues in fiscal 2025 (compared to base case expectation)
• Higher than expected dividend payout or investment in group companies, leading to lower liquidity levels compared to Crisil expectations.

About the Company

GHIAL was incorporated for the construction, operation, maintenance and subsequent expansion of RGIA in Hyderabad under a 30-year concession agreement expiring in 2038 (extended till 2068 in May 2022). The company is a joint venture between the GMR group (74% held through GMR Airports Ltd), AAI (13%) and Government of Telangana (13%).

Any other information: Not Applicable