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-ICRA hikes GMR Hyderabad International Airport bank lines to LBBB.

BANKING AND CREDIT NEWS-September 14, 2010--ICRA hikes GMR Hyderabad International Airport bank lines to LBBB(C)2010 M2 COMMUNICATIONS

14 September 2010 a[euro]" ICRA said it lifted the rating on the INR16.78bn (USD362m/EUR282m) term loan programme and INR750m fund-based limits of GMR Hyderabad International Airport Ltd (GHIAL) to LBBB.

GHIAL operates the Rajiv Gandhi International Airport located at Shamshabad, Hyderabad.

The rating was upgraded from LBBB-.

The outlook on the rating is "stable".

ICRA also upgraded the rating assigned to the INR1.25bn non-fund-based limits of GHIAL to A3+ from A3.

The upgrades reflect the benefits likely to accrue to the airport following the revival in passenger traffic levels since 2009-10 after a severe decline in 2008-09 and the positive developments on the regulatory front with the constitution of the Airport Economic Regulatory Authority (AERA) and the formulation of a proposed framework for the economic regulation of airports. ICRA notes that while the framework has not yet been finalised the overall policy direction appears to be moving towards remunerating airports with a fixed rate of return and their fixed costs within an overall price-cap, which should, once implemented, benefit the airport in terms of higher tariffs.

The ratings are however constrained by GHIAL's past financial performance characterised by lower-than-anticipated growth in non-aeronautical revenues, accumulated losses and low cash accruals. Also, in addition to the finalisation of the framework, the actual permitted increase of these charges would also be critical since there is likely to be user resistance towards any sharp increase in aeronautical charges over current levels. The company's capital structure, as a result of the losses suffered since inception, is currently adverse. ICRA however expects revenues to grow steadily in line with the expected growth in traffic, which, together with the various measures currently being taken by GHIAL to augment non-aeronautical revenues and the expected favourable fallout of the regulatory framework, once finalised, is expected to result in an improvement in GHIAL's financial profile. Improved cash generation would be critical given that GHIAL's term debt repayments begin in the current fiscal with the expiry of the moratorium.

The ratings continue to factor in GHIAL's monopoly position within Hyderabad and the stabilisation of its operations since the opening of the airport in March 2008. The ratings continue to reflect the strengths arising from being part of the GMR Group, diversified revenue streams with revenues from aeronautical charges, non-aeronautical revenues and the potential for real estate development, financial support from the Government of Andhra Pradesh in the form of interest-free loans with deferred payment terms and grants, and the modest revenue sharing with the Government of India. Also, GHIAL has limited expansion plans over the medium term. As a result, GHIAL's financial profile is expected to benefit from the expected improved cash accruals and a steady reduction in debt levels.

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Publication:M2 Banking & Credit News (BCN)
Geographic Code:9INDI
Date:Sep 14, 2010
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