Adani Airports' Capex To Enhance Regulated Asset Base In Six Locations, Says Jefferies
Adani Airports has recently been granted new tariff orders, indicating higher aero tariffs for its two airports in Jaipur and Thiruvananthapuram.
Adani Airport Holdings Ltd. is currently undertaking significant capital expenditure at six of its airports, which is expected to enhance the regulated asset base at these locations, according to Jefferies.
In 2023, the company received revised tariff orders for the airports in Ahmedabad, Mangalore, and Lucknow, while the updated tariff orders for Jaipur and Thiruvananthapuram airports were issued recently. The revised tariff order for Guwahati airport is still pending, the note said.
Adani Airports has recently been granted new tariff orders, indicating higher aero tariffs for its airports in Jaipur and Thiruvananthapuram.
These orders are a result of the increased regulated asset base or RAB, following capital expenditure at these airports. India's regulatory framework permits airports to recoup reasonable investment costs, it said.
Tariffs at Indian airports are regulated by the Airports Economic Regulatory Authority. These airports function under a 30% hybrid-till tariff model, where the aggregate revenue requirement from aeronautical activities is cross-subsidised with 30% of the revenue from non-aeronautical activities. AERA's tariff determinations hinge on the planned capital expenditures at the airports, adopting a 'fixed return on equity' model for tariff calculations, said Jefferies.
Jaipur Airport
The yield per passenger, or YPP, in aviation has increased by 2.4 times, following the new tariff order.
During Control Period 2, the YPP was approximately Rs 251 per passenger. For Control Period 3, the YPP is estimated to be around Rs 604 per passenger, said Jefferies.
Traffic is expected to grow from 54.7 lakh in fiscal 2024 to 97.5 lakh in FY27, indicating a compound annual growth rate of 21%.
The average regulated asset base in FY23 was Rs 508 crore, which is expected to increase to Rs 1,390 crore by FY27, it said.
In CP2, the user development fee was approximately Rs 360 per passenger for domestic flights and Rs 1,140 for international embarking passengers. For CP3, the projected FY25 UDF is set at Rs 805 for domestic embarking passengers and Rs 345 for disembarking, while for international flights, it is Rs 980/Rs 420 respectively, said the note.
Thiruvananthapuram Airport
Aero Yield Per Passenger has experienced a 2.2-fold increase following the new tariff order. During CP2, the YPP stood at approximately Rs 437 per passenger, while for CP3, it is anticipated to rise to Rs 941 per passenger.
Passenger traffic is projected to expand from 44.1 lakh in FY24 to 60.3 lakh in FY27, reflecting a CAGR of 11%, said the Jefferies note.
The average RAB for FY23 was around Rs 460 crore, with an expectation to escalate to Rs 1,470 crore by FY27. In CP2, the User Development Fee was Rs 487 for domestic and Rs 1,028 for international embarking passenger.
For CP3, the FY25 UDF is determined at Rs 770 for domestic departing and Rs 330 for arriving passengers. For international passengers, it is set at Rs 1,540 for departing and Rs 660 for arriving, it said.
GMR's Delhi Airport
GMR's Delhi International Airport Ltd. is in its fourth control period (FY25-FY29) and has proposed a revised tariff. Following substantial capital investments in DIAL's expansion, the regulatory asset base has tripled in anticipation of the upcoming pricing control period, said Jefferies.
This is expected to result in a higher aero tariff for the fourth control period as per the new tariff order. Moreover, the favorable arbitration awards received by GMR last year may further increase the Aero tariff in Delhi.
The Aero Yield Per Passenger is projected to increase to Rs 400-450 for the FY25-FY29 period, in contrast to the approximate Rs 150 base airport charge over the previous 5-7 years, it said.
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