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Bond Market News
Delhi International Airport Upgraded To B+ by S&P
July 28, 2023
Delhi International Airport’s (DIAL) dollar bonds have ticked higher after its ratings were upgraded to B+ from B by S&P. The primary reasons for the upgrade were robust traffic recovery, higher revenue figures and improved future cash flows. Domestic passenger volume had fully recovered to pre-pandemic levels in FY2023 at 49.7mn passengers, with this figure expected to increase to 55mn and 60mn in FY2024 and FY2025 respectively. Meanwhile, international passenger volume had recovered to roughly 88% of pre-pandemic levels in FY2023, which was higher than the previously forecasted value of 84%. This figure is projected to surpass pre-pandemic levels in FY2024. Such robust traffic recovery coupled with an upcoming terminal expansion will fuel DIAL’s non-aeronautical revenue, with their adjusted EBITDA margin expected to recover to about 30% over FY2024 and FY2025 from an average of 20% over the past two years. Furthermore, stable cash flow from contracted commercial property development income, an important part of DIAL’s business model, will support higher margins and better earnings quality. This should help to offset DIAL’s high fixed-cost base due to high revenue-share payments, S&P added. Finally, DIAL’s future cash flows are expected to strengthen due to higher tariffs imposed over the next control period.
DIAL’s 6.45% 2029s inched 0.75 points higher and are currently trading at 94.3 cents on the dollar, yielding 7.7%.
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