New Delhi, Aug 25 (PTI) Moody's Investors Service has revised the credit outlook for Delhi International Airport Ltd (DIAL) to stable from negative, citing sustained improvement in passenger traffic at Delhi airport and progress in securing additional funds for expansion.

DIAL, a joint venture between a GMR-led consortium and Airports Authority of India (AAI), operates the Indira Gandhi International Airport (IGIA) in the national capital. Its corporate family rating has been affirmed at B1.

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B1 rating indicates relatively higher credit risks.

The rating agency has also revised the outlook for India Airport Infra, previously Cliffton Ltd, to stable from negative.

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India Airport Infra is an orphan special purpose vehicle established to facilitate a USD bond issuance. Proceeds from the transaction were used to subscribe to Indian Rupee non-convertible debentures issued by DIAL, according to Moody's.

"The outlook change and rating affirmations reflect the sustained improvement in passenger traffic at Delhi Airport, as well as the airport's progress in securing additional funding for its expansion, which has reduced potential downside risks to the ratings over the next 12-18 months," Moody's Vice President and Senior Credit Officer Spencer Ng said in a release on Thursday.

DIAL does not have any equity interest or management control in India Airport Infra. India Airport Infra's B1 rating is closely linked to DIAL's rating, given that the former is reliant on cash flow from DIAL to meet its own debt servicing requirements, it said.

DIAL's B1 ratings are underpinned by the strong market position of IGIA, which is the country's busiest airport.

Passenger traffic has recovered strongly over the past twelve months, led by domestic passengers. Under Moody's base-case scenario, monthly domestic traffic is expected to recover to pre-pandemic levels before the end of fiscal 2023, it noted.

The rating agency noted that the domestic traffic has already reached 90 per cent of FY19 levels, and exceeded FY20 levels, consistently in recent months, the ratings agency said and added that it expects international traffic to fully recover in next fiscal.

Despite the potential dampening effects from slower economic growth and high fuel prices, Moody's expects passenger traffic to continue to grow over the next 12-18 months on the back of the strong underlying demand for air travel.

DIAL's exposure to funding risks associated with its expansion has reduced, following its successful drawdown from its Rs 1,700 crore lease facilities and the Rs 1,000 crore domestic bond issuance that was completed in June 2022, it said.

According to the release, the airport will likely require additional funding to repay deferred revenue share payments that are currently the subject of an arbitration process.

The total amount of such deferred revenue share payments is around Rs 13 billion according to management. Additional funding may also be required if there is an unexpected and material cost or time overrun to the expansion, which DIAL expects to complete by September 2023, Moody's said.

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