Phase 1 of Navi Mumbai airport to cost ₹135.6 bn

The first phase of the Navi Mumbai airport will now cost ₹ 135.6 billion, which is about 50% higher than the previous project estimate.

On Saturday, airport developer GVK group announced that it had tied up with Yes Bank as lead lender for the project. Global analytical company CRISIL has assigned its A+ stable rating to the long-term bank facility of ₹103 billlion that Navi Mumbai International Airport Limited (NMIAL) has availed of. “We are in a non-disclosure agreement with Yes Bank, which does not allow us to share any of the finer details of the phase I project financing for NMIAL,” GVK said.

For arriving at the rating, CRISIL considered the business and financial risk profiles of NMIAL. In addition, CRISIL believes NMIAL, being a subsidiary of Mumbai International Airport Ltd (MIAL), will benefit from the parent’s managerial, operational, and financial strengths. Both companies will serve the common catchment of Mumbai Metropolitan Region.

“CRISIL understands MIAL will provide timely support, articulated below, to NMIAL for implementation and stabilisation of operations. The criteria for parent notch-up framework has been applied to arrive at the final rating of NMIAL,” the agency said in a rating rationale issued on July 7.

CRISIL noted that MIAL has a track record of timely completion of Terminals 1 and 2 of Chhatrapati Shivaji International Airport (CSIA). The management support is through common board directors and senior management deputed from MIAL, which has also provided sponsor undertaking for shortfall in termination payment and cost overrun.

“Additionally, MIAL has provided corporate guarantee for equity contribution into NMIAL and shortfall in base case debt service coverage ratio (DSCR) up to four years from the start of commercial operations,” CRISIL noted.

NMIAL is critical for MIAL on account of the latter’s majority ownership, the scale of Navi Mumbai airport project, and the strategic importance of NMIAL to MIAL for growth, given the operational constraints at MIAL, it said.

Since the project is also being monitored by the State government and the Ministry of Civil Aviation for streamlining implementation issues, CRISIL believes such focus will aid the implementation of the project.

Risk exposure

The rating rationale noted that land acquisition and clearances were in advanced stages and pre-development work involving land filling and diversion of Ulwe River, which will be carried out by CIDCO, are of moderate complexity and in progress. “Appointed date of the project is yet to be declared. Given the nascent stage of the project, NMIAL is exposed to risks of delay in land acquisition, completion of pre-development work, pending approvals, which may lead to cost and time overrun,” CRISIL said.

The rating agency pointed out that overall cost, and presence of road and allied connectivity will be key considerations for airlines moving into the new airport, which may constrain offtake in the initial few years. “Furthermore, once operational, development of non-aero revenue streams and monetisation of commercial property will be subject to demand and pricing risks,” it said.

As per the CIDCO’s estimate Phases 1 and 2 of the airport would cost around ₹95 billion. The first phase, which includes construction of a single runway and terminal to handle 10 million passengers, would cost ₹55 billion. This cost excludes pre-development works including flattening of a hillock, diversion of rivers, shifting of transmission lines and land reclamation at an estimated cost of ₹ 34 billion.

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Printable version | Jun 28, 2022 1:31:16 am |