9 airports under PPP model to log 50% growth in revenue this fiscal

Mumbai: Nine airports operating under the PPP model in the country are expected to log a 50 per cent growth in their aggregate revenue at Rs 9,650 crore this fiscal from Rs 6,450 crore in the last fiscal, a report said on Wednesday.

The estimated growth in revenue, according to the credit rating agency CareEdge Ratings, will come on the back of an anticipated 70 per cent year-on-year surge in passenger traffic, which is likely to reach 93 per cent of pre-pandemic levels in the current financial year.

However, on an overall basis passenger traffic is expected to surpass the pre-Covid level by 1.12 times in the fiscal year starting April 2023, it said.

The rating agency also believes a further delay in the airport privatisation and the government's plan to exit its stake from joint venture airports.

"CareEdge Ratings has assessed the aggregate financial position of nine PPP airports which represent 50 per cent of total India's passenger traffic. The aggregate revenues of these airports are estimated to grow by 50 per cent from Rs 6,450 crore during FY22 to Rs 9,650 crore during FY23, mainly led by strong passenger growth of 70 per cent on a year-on-year basis,” the agency said.

It added that although healthy passenger traffic is positive for the sector, on-time issuance of tariff orders with an envisaged tariff rate hike for a few airports is critical.

According to CareEdge, during the Covid period, the Airport Authority of India had extended relief to airport operators by exempting claims on revenue share, due to which PBILDT (profit before interest, lease, depreciation and taxes) margins in FY22 remained at a healthy 56 per cent.

However, with the resumption of revenue sharing with the AAI, PBILDT margins are likely to drop to 37 per cent during FY23, it said and added that from the next fiscal such margins are likely to stabilise at around 45 per cent, mainly supported by the increased scale of operations.

The National Monetization Pipeline (NMP) has identified 25 airports for monetisation. The estimated fund inflows from the monetisation of 14 airports and divestment of AAI's stake at existing airports is pegged at Rs13,000 crore till FY23, as per CareEdge.

Against the backdrop of such ambitious timelines mentioned with no commensurate initiatives for monetisation, CareEdge Ratings believes that these timelines are likely to be further deferred, thereby necessitating intervention from the Central Government.

It also said that India's GDP growth and its multiplier effect on air passenger traffic growth with favourable demographics of a rising working population augur well for Indian airport operators.

According to the report, improving the regulatory environment with the timely issuance of tariff orders will pave the way for timely revenue visibility for these operators.

Moreover, leverage indicators are likely to remain at elevated levels for FY23. However, air passenger traffic growth beyond pre-Covid levels and the issuance of new tariff orders in some of the PPP airports are likely to strengthen leverage indicators from FY24, it said.

“Over FY23-FY25, CareEdge Ratings expects the air traffic growth rate to be 2.25 times that of the GDP growth rate, primarily due to the low base in FY22. Key growth drivers include improved economic output, declining fare gap between rail and air and full resumption of international travel in the short term while India's favourable demographic profile with a rising working population and widening middle class hold good for long-term prospects,” said Maulesh Desai, Director at CareEdge Ratings.

He said that timely receipt of tariff orders for the upcoming control period renders strong revenue visibility and aids in recouping the loss in aero revenues.

Desai, however, noted that there have been delays in issuing the first tariff orders in some of the concessions mainly on account of differences in Capex estimation and proposed user development fees (UDF) between developers and authority.