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The recent decision by the arbitration tribunal to absolve Delhi International Airport Limited (DIAL) of its revenue share commitments during the pandemic is viewed as a positive outcome for the company's credit profile, according to Fitch Ratings.
Fitch sees this decision as a substantial step in reducing the number of unresolved issues at DIAL and anticipates that it will contribute to the company's deleveraging shortly. During the pandemic, DIAL invoked the force majeure clause to excuse the monthly annual fee (MAF) payment, a move contested by the Airports Authority of India (AAI). The arbitration tribunal's decision, announced on January 6, 2024, has relieved DIAL from making the MAF payment for the period spanning March 19, 2020, to February 28, 2022, citing force majeure. Furthermore, the tribunal directed AAI to refund INR 5 billion to DIAL for the period from March 19, 2020, to December 31, 2020, and waived DIAL's INR 12 billion payment for January 1, 2021, to February 28, 2022. The tribunal also granted an extension in the airport concession period, contingent on government authorities' approval, by one year and 11 months - aligning with the period excused under force majeure. Fitch's Positive Outlook on DIAL's rating reflects the expectation of deleveraging shortly, supported by anticipated growth in passenger traffic, expected tariff hikes, and the resolution of key outstanding issues. Despite the tribunal's decision, Fitch acknowledges the potential risk that the ruling may face challenges from AAI. The situation will be closely monitored, and Fitch commits to taking appropriate rating actions as necessary. (ANI)
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