Rating Rationale
October 05, 2020 | Mumbai
Navi Mumbai International Airport Private Limited
Rating downgraded to 'CRISIL B'; continues on 'Watch Negative'  
 
Rating Action
Total Bank Loan Facilities Rated Rs.10300 Crore
Long Term Rating CRISIL B (Downgraded from 'CRISIL BB'; Continues on 'Rating Watch with Negative Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL's rating on the long-term bank facility of Navi Mumbai International Airport Private Limited (NMIAL) has been downgraded to 'CRISIL B' from 'CRISIL BB' and continues to be on 'Rating Watch with Negative implications'.
 
The downgrade follows the rating action on the parent, Mumbai International Airport Ltd (MIAL; 'CRISIL B/CRISIL C/CRISIL A4/Watch Negative'), reflecting the weakening of its credit risk profile.
 
The rating continues to reflect the extensive experience of the parent in developing and operating airports and the technical, managerial and financial support provided, if required, for the project. The rating also factors in the regulated hybrid till tariff structure and a ring-fenced business structure with the presence of City and Industrial Development Corporation (CIDCO) of Maharashtra, thus lowering the post-commissioning risk to a certain extent. These strengths are partially offset by susceptibility to project-related risks, especially with regard to implementation and stabilisation of operations.

Analytical Approach

For arriving at its rating, CRISIL has combined the business and financial risk profiles of MIAL and NMIAL. That's because both these airports will serve the common catchment of the Mumbai Metropolitan Area and have shared management and board members, leading to a complementary strategy in the operations phase. Also, CRISIL understands that MIAL will provide timely support to NMIAL for project implementation and stabilisation.

CRISIL has applied its parent notch-up framework to factor in the extent of financial, operational and managerial support available to NMIAL from MIAL.

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
Weakness:
* Exposure to project risks, given the early stage
A concession agreement was signed with CIDCO (City and Industrial Development Corporation) in January 2018. Presently, land acquisition and clearance are in advanced stages, and pre-development work of moderate complexity involving land filling and diversion of the Ulwe River, to be carried out by CIDCO, are in progress.
 
Given the early stage of the project, the company is exposed to risks of delay in land acquisition, completion of pre-development work and pending approvals, which can result in cost and time overruns.
 
* Exposure to offtake risk after commissioning
Offtake after commissioning is expected to be supported by availability of time slots and cargo handling facilities at the new airport, which will cater to pent-up demand from the Mumbai Metropolitan Region on account of operational constraints at the current airport. MIAL, being the promoter, will aid smooth stabilisation and continued traffic growth expected post normalisation of the Covid-19-related slowdown in the aviation sector. However, overall costs and the presence of road and allied connectivity would be key considerations for airlines moving into the new airport, which may constrain offtake in the initial few years. Furthermore, once operational, development of non-aeronautical revenue streams will be subject to demand and pricing risks.
  
Strengths:
* Strong support from the parent
Benefits are expected from the operational, management and financial support of MIAL during implementation and stabilisation of the project. The parent has a track record of timely completion of Terminals 1 and 2 of the Chhatrapati Shivaji Maharaj International Airport, Mumbai. Management support is through a common board of directors and senior management being deputed from MIAL. The parent is also likely to provide financial support, if required, to meet any cost overrun and shortfalls in debt servicing in the first few years of operations. MIAL has agreed to provide sponsor undertaking for shortfall in termination payment and cost overrun. Additionally, the parent has agreed to provide corporate guarantee for equity contribution into NMIAL and shortfall in debt service reserve amount (DSRA) for up to four years from the start of commercial operations or achievement of debt service coverage ratio of 1.25 times and 1.33 times for two consecutive years, whichever is later.
 
NMIAL is critical for MIAL on account of the latter's majority ownership, the size of the overall project and the strategic importance for growth, given the operational constraints of the parent.
 
* Lower implementation risk, deriving strength from the concession agreement
Airport projects have lower implementation challenges than other infrastructure asset classes. NMIAL further benefits from the provisions in the concession agreement, which included extension for construction and concession periods if the entire land for the project was not provided by CIDCO by November 4, 2018. Furthermore, the presence of CIDCO for carrying out land acquisition and aiding in getting the requisite regulatory approvals lowers implementation risk. CIDCO has handed over 99.65% unencumbered land to NMIAL. Appointed date was declared on July 7, 2018, and any delay in project implementation on account of late handover of the remaining land shall be adequately compensated by CIDCO as per the provisions of the concession agreement. Presently, key approvals for the project, including stage 2 forest clearance, environment clearance and permission for clearance of mangroves and development plan, have been obtained.
 
The project is critical for the Mumbai Metropolitan Region given that the current airport operated by MIAL has capacity constraints on account of infrastructure limitations. Implementation of the new airport is also being monitored by the Government of Maharashtra and the ministry of civil aviation for streamlining any project implementation issues. Such focus aids project implementation.
Liquidity Adequate

Operations are expected to start by fiscal 2023. The company has raised long-term loans for financing the debt portion of the capital expenditure. MIAL invested around Rs 905 crore towards equity commitment as of March 31, 2020. The parent is likely to provide timely support, if required, during the implementation and stabilisation phases.

Rating Sensitivity factors
Upward factors
* Upward revision in the rating on MIAL from the current 'CRISIL B/CRISIL C/CRISIL A4+/Watch Negative'
* Project completion without deviations in time and cost (as per concession terms) along with clarity on first control period tariff order
 
Downward factors
* Downward rating action on MIAL
* Delay in land handover and disbursement of project loans, impacting project commissioning
About the Company

NMIAL is a 74% subsidiary of MIAL. The remaining stake is held by CIDCO, which is the concessioning authority for the project. NMIAL won the bid for developing, operating and maintaining the greenfield Navi Mumbai airport in Maharashtra under a 40-year concession (additional 20 years subject to a re-bid, with NMIAL having right of first refusal within 5% of the winning bid). Phase I is expected to be implemented at a cost of Rs 14,181 crore (including cost of pre-development works funded by CIDCO as soft loan), with a capacity of 1 crore passengers per annum. 

Key Financial Indicators
Particulars Unit 2020 2019
Revenue Rs crore NA NA
Profit after tax (PAT) Rs crore NA NA
PAT margin % NA NA
Adjusted debt/adjusted networth Times NA NA
Adjusted interest coverage Times NA NA
Not applicable as the project is under implementation.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon
rate (%)		 Maturity date Complexity Levels Issue size
(Rs crore)		 Rating assigned
with outlook
NA Proposed Long Term
Bank Loan Facility		 NA NA NA NA 10300 CRISIL B/Watch Negative
 
Annexure - List of entities consolidated
Name of entities consolidated  Extent of consolidation Rationale for consolidation
Mumbai International Airport Ltd Full consolidation Significant financial and operational linkages
Navi Mumbai International Airport Pvt Ltd Full consolidation Significant financial and operational linkages
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  10300.00  CRISIL B/(Watch) Negative  08-09-20  CRISIL BB/Watch Negative  17-10-19  CRISIL A-/Watch Negative  07-07-18  CRISIL A+/Stable    --  -- 
        19-08-20  CRISIL BB/Watch Negative  28-08-19  CRISIL A/Watch Negative           
        13-07-20  CRISIL BB+/Watch Negative  31-07-19  CRISIL A/Watch Negative           
        20-05-20  CRISIL BB+/Watch Negative  09-07-19  CRISIL A/Watch Negative           
        24-03-20  CRISIL BBB/Watch Negative  28-05-19  CRISIL A+/Stable           
        20-02-20  CRISIL BBB+/Watch Negative               
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Proposed Long Term Bank Loan Facility 10300 CRISIL B/Watch Negative Proposed Long Term Bank Loan Facility 10300 CRISIL BB/Watch Negative
Total 10300 -- Total 10300 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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