Cochin International Airport Limited - ICRA
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Cochin International Airport Limited
August 13, 2018
Summary of rated instruments
Current Rated Amount
Instrument Rating Action
(Rs. crore)
Fund based-Term Loan 500.00 [ICRA]AA- (Stable); Assigned
Total 500.00
Rating action
ICRA has assigned a long-term rating of [ICRA]AA- (pronounced ICRA double A minus) to the Rs. 500.00-crore1 fund-
based facilities of Cochin International Airport Limited (CIAL)2. The outlook on the long-term rating is ‘Stable’.
Rationale
The assigned rating favourably factors in the healthy growth in passenger traffic at a CAGR of 17.1% during FY2014-
FY2018 to 10.2 mn and air traffic movement (ATMs) grew at a CAGR of 10.2% to 69,662 during the period. The rating
takes into account the strong operational track record of over 19 years with lowest capital cost 3 per sqm with least
burden on passengers (no user development fee (UDF)) amongst all the major airports which reduces regulatory risk to a
large extent. The rating favourably factors in the policy directive from Ministry of Civil Aviation (MoCA), which
recommended hybrid till (as per National Civil Aviation Policy, 2016 (NCAP-2016)) for future tariff determination at all
airports; the shift from single to hybrid till will result in increase in cash accruals. ICRA notes that the Airport Economic
Regulatory Authority (AERA) has finalised the tariff for second control period (FY2017-FY2021) on July 13, 2017 with
effective date of implementation as August 2017. The rating draws comfort from the healthy financial profile of the
company characterized by conservative capital structure with low TOL/TNW of 0.9 times, strong debt coverage indicators
with interest coverage of 8.8 times, and comfortable liquidity position with unencumbered liquid surplus of Rs. 81 crore
as on March 31, 2018. The rating also takes into account the strengths arising from the regulatory framework which
allows efficient cost recovery as a part of the tariff from the users.
The rating, however, remains constrained by the high competition from four (three operational and one under
construction) international airports situated within 180 km radius from CIAL viz. Trivandrum International Airport, Calicut
International Airport and Coimbatore International Airport and one upcoming airport - Kannur International Airport.
However, CIAL is well positioned in terms of cost competitiveness (least burden on passengers), its proximity to major
tourist destinations and Cochin being the major business hub in Kerala. International passengers account for around 52%
of total passenger throughput at CIAL. ICRA notes that majority of the international traffic is from the middle-east region.
Any slowdown in the economy in Gulf region, could have an adverse effect on traffic and consequently revenues. The
variation in passenger traffic due to economic cycles, which may lead to temporary traffic de-growth and in-turn revenue
decline is compensated by truing up for the shortfall in the next regulatory period, albeit with a lag. Unlike the other
private airports which are either governed by the operations, maintenance and development agreement (OMDA) or
concession agreements. There is no concession awarded by GoI in the case of CIAL. In the absence of a concession
1
100 lakh = 1 crore = 10 million
2
For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications
3
CIAL has been used as benchmark for normative approach for capex as per AERA
1agreement (CA), the rights, obligations and the concession period are not defined for CIAL. Further, GoI is not bound by
any non-compete/ right of first refusal clauses should there be any proposal to develop new international airports in the
region. However, comfort can be taken from Government of Kerala’s shareholding of around 34% along with the long
operational track record – there was no objection raised by GoI/AAI even at the time of inviting bids for other major
private airports (during FY2002-FY2006). ICRA in its base case scenario has assumed capex of around Rs. 700 crore during
FY2019-FY2021 in line with the capex considered in the tariff order for second control period.
Outlook: Stable
ICRA believes CIAL will continue to benefit from the long operational track record and the low regulatory risk on account
of high cost competitiveness and lowest capital cost among all major airports. The outlook may be revised to 'Positive' if
there is significantly higher than estimated traffic growth and non-aeronautical revenues. The outlook may be revised to
'Negative' if there is higher than expected support to Group companies, or significantly lower than estimated traffic
resulting in lower than anticipated revenues.
Key rating drivers
Credit strengths
Robust growth in traffic: The growth in traffic both in terms of passenger traffic and air traffic movement has been
robust over the last five years. Passenger traffic grew at a CAGR of 17.1% during FY2014–FY2018 to 10.2 million and
ATMs grew at a CAGR of 10.2% to 69,662 during the period.
Favourable policy directive from the Ministry of Civil Aviation (MoCA): MoCA recommended hybrid till (as per NCAP-
2016) for future tariff determination at all airports; the shift from single to hybrid till aids in improvement in cash
accruals.
Long operational track record with low burden on passengers: The company has strong track record of operations for
over 19 years with lowest capital cost per sqm and least burden on passengers (no user development fee (UDF)) when
compared to other major airports which reduces regulatory risk to a large extent. Further, AERA has finalised the tariff
for second control period under hybrid till (FY2017-FY2021) on July 13, 2017 with effective date of implementation as
August 2017.
Healthy financial profile: The rating draws comfort from the healthy financial profile of the company characterized by
conservative capital structure with low gearing of 0.4 times, strong debt coverage indicators with interest coverage of 8.8
times, TOL/TNW of 0.9 times and comfortable liquidity position with unencumbered liquid surplus of Rs. 81 crore as on
March 31, 2018
Credit challenges
High competition from other international airports in the vicinity: CIAL has four (three operational and one under
construction) international airports within 180 km radius from CIAL. However, CIAL is well positioned in terms of cost
competitiveness (least burden on passengers), its proximity to major tourist destinations and Cochin being the major
business hub in Kerala
High concentration of international passengers from middle-east region: International passengers account for around
52% of total passenger throughput at CIAL. ICRA notes that majority of the international traffic is from the middle-east
region. Any slowdown in the economy in Gulf region, could have an adverse effect on traffic and consequently revenues
2Lack of Concession Agreement: In the absence of a concession agreement (CA), the rights, obligations and the
concession period are not defined for CIAL. Further, GoI is not bound by any non-compete/ right of first refusal clauses
should there be any proposal to develop new international airports in the region. However, comfort can be taken from
Government of Kerala’s shareholding of around 34% along with the long operational track record – there was no
objection raised by GoI/AAI even at the time of inviting bids for other major private airports (during FY2002-FY2006).
Revenue generation remains exposed to movements in aviation traffic: The variation in passenger traffic due to
economic cycles, which may lead to temporary traffic de-growth and in-turn revenue decline is compensated by truing
up for the shortfall in the next regulatory period, albeit with a lag.
Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.
Links to applicable criteria:
Corporate Credit Rating Methodology
Rating Methodology for Airports
About the company:
Cochin International Airport Limited (CIAL) was the first airport in India to be built under Public Private Partnership (PPP),
with equity participation from the airport users as well as the general public, Non-Resident Indians (NRIs), Government
of Kerala (GoK) and the airport service providers. Chief Minister (CM) of Kerala is the chairman of the company. CIAL was
incorporated on March 30, 1994 as a public limited company. The construction work commenced in August 1994 and
achieved commercial operations in June 1999. To cater to the high traffic demand, CIAL constructed new international
terminal with 12 mn passenger capacity per annum which was inaugurated in March 2017. The project cost for the same
was Rs. 985 crore which was funded through external debt, rights issue and internal accruals. Government of Kerala
(GoK) is the major shareholder in CIAL with 32.4% stake.
Key financial indicators
FY2017 FY2018
Audited Provisional
Operating Income (Rs. crore) 473.6 540.6
PAT (Rs. crore) 179.5 156.0
OPBDIT/OI (%) 60.2% 69.4%
RoCE (%) 24.0% 16.3%
Total Debt/TNW (times) 0.3 0.4
Total Debt/OPBDIT (times) 1.3 1.3
Interest coverage (times) 80.3 8.8
Source: CIAL
3Status of non-cooperation with previous CRA: Not applicable
Any other information: None
Rating history for last three years:
Chronology of Rating History for the
Current Rating (FY2019) past 3 years
Date & Date & Date &
Date & Rating in Rating in Rating in
Amount Amount
Rating FY2018 FY2017 FY2016
Rated Outstanding
Instrument Type (Rs. crore) (Rs Crore) August 2018 - - -
1 Term Loan Long 500.00 500.00 [ICRA]AA- - - -
Term (Stable)
Complexity level of the rated instrument:
ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in
4Annexure-1: Instrument Details
Date of Amount
Issuance / Coupon Maturity Rated Current Rating and
ISIN No Instrument Name Sanction Rate Date (Rs. crore) Outlook
March
NA Term Loan 8.9% March 2028 500.00 [ICRA]AA- (Stable)
2015
Source: CIAL
5ANALYST CONTACTS
Shubham Jain Rajeshwar Burla
+91 124 4545306 +91 40 4067 6527
shubhamj@icraindia.com rajeshwar.burla@icraindia.com
Abhishek Lahoti
+91 40 4067 6534
abhishek.lahoti@icraindia.com
RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com
Helpline for business queries:
+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)
info@icraindia.com
About ICRA Limited:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.
For more information, visit www.icra.in
6ICRA Limited
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Tel: +91 124 4545300
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© Copyright, 2018 ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of
surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer
concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA
office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to
be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it.
While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any
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