DIAL’s Ambitious Growth Plan and Funding Strategy

Delhi International Airport Limited (DIAL), the operator of the Indira Gandhi International Airport (IGIA), is gearing up for an ambitious growth plan. DIAL is currently engaged in discussions with bankers about raising up to $350 million in debt issuance. However, the exact nature of fundraising has yet to be determined. The funds raised will be utilised to refinance existing dollar bonds of New Delhi’s primary aviation hub.

Delhi International Airport (DIAL) is a joint venture consortium of GMR Group (64%), Airports Authority of India (26%) and Fraport (10%).

The GMR Group has yet to decide on a date for the bond issuance. Talks with bankers like HSBC and JP Morgan are still in the early stages.

The proceeds of this bond will be used by the DIAL to refinance a $450 million note with a 6.25% interest rate that is due in October 2025. This was released by India Airport Infra, the offshore special purpose company of DIAL, which is an orphan finance vehicle that is legally unrelated to DIAL.

DIAL is anticipating a cost overrun of ₹1,066 crore due to changes in scope, which can be funded partially through additional debt of ₹800 crore and the rest through internal funds. DIAL is raising ₹800 crore through NCDs for this purpose. To fund the ₹ 800 crore cost overrun associated with the expansion project, DIAL is looking to tap into both overseas and domestic debt markets. This move signifies DIAL’s commitment to expanding IGIA’s capacity and potentially improving India’s aviation infrastructure.

Why the Cost Overrun?

The initial estimates for IGIA’s expansion project fell short due to:

• Changes in Scope: The project’s scope might have been expanded to include additional facilities or upgrades not envisaged earlier.
• Material Price Fluctuations: The cost of raw materials and construction materials can fluctuate significantly. Unexpected price rises could have contributed to the overrun.
• Unforeseen Delays: Construction projects are susceptible to delays due to various factors like labour issues or permit clearances. These delays can lead to additional costs.

Funding the Expansion: A Two-Pronged Approach

To bridge the funding gap, DIAL is adopting a dual strategy:

• Domestic Debt: DIAL plans to raise ₹800 crore through Non-Convertible Debentures (NCDs) issued within the Indian market. This allows them to access domestic capital at potentially lower interest rates compared to overseas borrowings.
• Overseas Debt: DIAL is exploring the possibility of tapping into overseas debt markets. This option can provide access to foreign currency and diversify their funding sources.

About GMR Airports Infrastructure Ltd

GMR Airports Infrastructure is mainly engaged in the development, maintenance and operation of airports and other allied activities.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.