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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 90.00 | ACUITE C | Reaffirmed | - |
| Bank Loan Ratings | 692.00 | ACUITE D | Downgraded | - |
| Bank Loan Ratings | 110.00 | ACUITE D | Reaffirmed | - |
| Total Outstanding | 892.00 | - | - |
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Rating Rationale |
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Acuité has downgraded its long-term rating to 'ACUITE D’ (read as ACUITE D) from 'ACUITE C' (read as ACUITE C) on Rs.692.00 Cr. bank facilities of Kannur International Airport Limited (KIL). Acuité has reaffirmed its long-term rating to 'ACUITE C' (read as ACUITE C) on the Rs.90.00 Cr. bank facilities of Kannur International Airport Limited (KIL). Acuité has reaffirmed its long-term rating to 'ACUITE D' (read as ACUITE D) on the Rs.110.00 Cr. bank facilities of Kannur International Airport Limited (KIL). Rationale for Rating The rating downgrade is on account of instances of delays in term loan servicing observed in the recent months, as confirmed by the management and the banker. |
| About the Company |
| Kannur International Airport Limited (KIAL) was incorporated as a private limited company on December 3, 2009, and was later converted to a public limited company in August 2020, and commercial operations began in December 2018. The company was established with objective of building, financing, constructing, operating, and managing an international airport in Kannur, Kerala. The project is proposed by the Kerala Government (GoK), which holds a 39.23% stake in the company. The company's chairman is Kerala's Chief Minister (CM). KIAL has the total current passenger handling capacity of 9.34 million per annum. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial profile of Kannur International Airport limited to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Extensive expertise of the management and strong parentage The company benefits from the extensive expertise of the management including Mr. Dinesh Kumar C(Managing Director). He is a qualified Civil Engineer and is the former Airport Director of Cochin International Airport Limited. He has hands-on experience in Airport Operations. Chief Minister (CM) of Kerala is the chairman of the company. Kannur International Airport Limited (KIAL) was built under Public Private Partnership (PPP). Chief Minister (CM) of Kerala is the chairman of the company. The Government of Kerala (GoK) is the major shareholder in KIAL with 39.26% stake followed by Bharat Petroleum Corporation Limited (16.19% shareholding), Airports Authority of India (7.47% shareholding), and MA Yusufali (8.59% shareholding) among others. Acuité believes that the company will derive benefit from its experienced management and KIAL having attractive location and regulated business model of airport providing true-ups, assures safeguard against impact on traffic and non-aeronautical revenue growth in the long term. |
| Weaknesses |
| Weak operational performance
KIAL has shown an improvement in the revenues, however, has not yet achieved the pre-covid levels. The operating revenue stood at Rs.113.34 Cr. in FY2023 against Rs.78.57 Cr. in FY2022, Rs.45.85 Cr. in FY2021 and Rs.116.25 Cr. in FY2020. Further, while the company has achieved positive operating profit for the last two consecutive years which stood at Rs.30.20 Cr. in FY2023 against Rs.14.05 Cr. in FY2022 and Loss of Rs.25.19 Cr. in FY2021, the net profitability has not improved, and it reported net losses of Rs.126.27 Cr. in FY2023 against Rs.124.30 Cr. in FY2022. The number of passengers handled stood at ~12 lacs in FY2023 against 8 lacs in FY2022 which approx. and thus has achieved ~75% pre covid-levels. (16.2 lac in FY2020). Going ahead, KIAL is expected to gradually increase the revenues and profitability subject to successful implementation of the steps being taken for the same by the airport. Weak financial risk profile characterised by continued losses. KIAL’s financial risk profile is weak owning to consistent net losses resulting in eroding the net worth. The tangible net worth stood at Rs.764.19 Cr. in FY2023 against Rs.891.73 Cr. in FY2022 and Rs.1015.75 Cr. in FY2021. Its gearing and total outside liabilities to tangible net worth (TOL/TNW) levels stood at 1.43 times and 1.50 times as on 31 March 2023 respectively vis-à-vis 1.16 times and 1.20 times as on 31 March 2022. The debt protection metrics are poor; marked by interest coverage ratio and net cash accruals to total debt (NCA/TD) at 0.28 times and -0.05 times, respectively, in FY2023 as against at 0.26 times and -0.05 times, respectively, in FY2022. Acuité believes that the KIAL’s financial risk profile will remain weak over the medium term and timely receipt of funds from the promoter is critical to meet its funding requirements towards term loan repayment, and the same would be a key rating monitorable. Instances of delays in servicing of debt obligation As per the banker's feedback received, the company has delayed in servicing of obligations of term loans in recent past. Exposure to regulatory risks 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. Appropriate and timely true ups for lower traffic and approval for cost overrun for capex, if any, are the open risks currently. The regulatory regime for airport operators in India is still evolving. Risks pertaining to timeliness of tariff orders and their implementation persist and will affect airport operators when they seek a true-up either for lower-than-expected revenue or higher capex for past control periods. |
| Rating Sensitivities |
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| Liquidity Position |
| Poor |
| KIAL’s liquidity position is poor, as reflected by significant cash losses incurred by the company since FY2018 to FY2023, which is likely to continue over the medium term as well. This weakened liquidity profile and pandemic hit operations have constrained ability to service debt. Further, there have been instances of recent delays in servicing of the term loan obligations. |
| Outlook: Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 113.34 | 78.57 |
| PAT | Rs. Cr. | (126.27) | (124.30) |
| PAT Margin | (%) | (111.41) | (158.21) |
| Total Debt/Tangible Net Worth | Times | 1.43 | 1.16 |
| PBDIT/Interest | Times | 0.28 | 0.26 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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