Ind-Ra revises airport sector outlook to stable from positive

Ind-Ra revises airport sector outlook to stable from positive

Mumbai, Feb 19 (PTI) Expecting the high double digits air passenger volume that the industry has been clocking for the past 20 months or so, rating agency India Ratings has revised the outlook for airports by one notch from positive to stable for FY19.

The agency has also maintained a stable outlook on the overall transport infrastructure sector and has revised the same on toll roads to stable from negative, for FY19.

"The outlook revision to stable from positive for the airport sector reflects limited upward rating movements, although we expect continued growth in passenger volumes," India Ratings said in a report today.

"Airport operators have been refinancing their bank loans with international issuances. Although introduction of normative capital cost in June 2016 has delayed capacity expansion, large private airports have commenced capacity expansion programme, where the expenses are below or equal to normative costs," it added.

But the agency has warned that any prolonged delay in starting capex will impair operational parameters, saying "similar challenges are likely to crop up in airports owned by the Airport Authority with soaring volumes, notwithstanding, proposed and ongoing expansion plans."

"Consequently, debt would spike for major private airports; however, the coverage would remain comfortable," it added.

On the road segment, which will also drive the transport infrastructure, India Ratings feels the sector has been bolstered by the entry of foreign investors into the projects and relaxation of norms by the National Highways Authority.

"Reflecting the broader trend, the credit profiles of several road projects have been strengthened by way of debt reduction, enabled by a new strong sponsor and locking in low interest rates by accessing capital market or other financial institutions for refinancing," it said.

The agency noted that road projects have displayed a quantum jump in construction pace due to government reforms in the road sector and award of projects through hybrid annuity model or EPC contracts.

"There were some disruptions due to uncertainty on implications of GST and monsoons during the first half of the current fiscal," it said.

The report has also observed that post-GST rollout, some tenders for roads were delayed or re-tendered due to the lack of clarity over its tax implications.

"However, the pace of award will see a significant uptick in coming quarters, as the agency expects the government to award HAM projects and EPC contracts under the Bharatmala Project," it said.

Meanwhile, it has also maintained a stable outlook for seaports for FY19, due to reasonable throughput volumes expectations, despite subdued capacity utilisation.

After witnessing a contraction at non-major ports in FY16, revenue recovered in FY17 and are likely to continue the growth in the current as well as the next fiscal, it said.

"While some of the ports tackled low coal volume throughput by substitution of containers and other cargoes, they missed annual targets. This led to stress on their debt service coverage ratios," it said, adding, "on the contrary, diversified cargo enabled ports to maintain healthy cash flows." PTI SSM SS BEN BEN