Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Debt Capital Markets

GMR Hyderabad International Airport / Debt Capital Markets

We view GMR Hyderabad (GHIAL) as “Low Risk” on the LARA scale, due to low business risk and a manageable financial risk profile. GHIAL is essentially a regulated monopolistic business, with no substitution risk. Strong growth in India’s air traffic, the favourable location of the airport (central India), and land use rights more than offset its small scale. The airport is currently running at full capacity, and thus will require capex to expand, which will lead to additional funding requirements and impact credit metrics. The tariff structure is favourable, as it mitigates risks associated with traffic volumes and operating costs, which should result in very stable EBITDA margins. A key risk are potential regulatory changes, which have affected both GHIAL and Delhi International Airport (DIAL) in the past. Our fundamental Credit Bias is “Stable”, as strong secular growth in air traffic in India and GHIAL’s monopolistic position are counterbalanced by the large capex required to fund the airport's expansion. We view GHIAL’s corporate governance as “Moderate” on the LAGA scale. We view favourably the shareholder structure, which includes Airports Authority of India (13%) and the Government of Telangana (13%). A further positive is the good track record of GMR Group, which also owns DIAL. The Board composition is sound, with 4 INEDs (out of 15 Board members), despite the private nature of the business. Our assessment also takes into account the private nature of the business, with few checks and balances. GHIAL's closest peer is DIAL, which is also has HY bonds outstanding. On the surface, DIAL looks better than GHIAL, especially in terms of the scale of the business. Based on a detailed analysis, however, we believe GHIAL is on par, or even a slightly better credit, with less regulatory risk, more stable EBITDA margins and lower leverage. As a result, we expect the proposed 10-year Notes to price at 4.75%, and recommend investors to participate at or above this level.

We view GMR Hyderabad (GHIAL) as “Low Risk” on the LARA scale, due to low business risk and a manageable financial risk profile. GHIAL is essentially a regulated monopolistic business, with no substitution risk. Strong growth in India’s air traffic, the favourable location of the airport (central India), and land use rights more than offset its small scale. The airport is currently running at full capacity, and thus will require capex to expand, which will lead to additional funding requirements and impact credit metrics. The tariff structure is favourable, as it mitigates risks associated with traffic volumes and operating costs, which should result in very stable EBITDA margins. A key risk are potential regulatory changes, which have affected both GHIAL and Delhi International Airport (DIAL) in the past.  Our fundamental Credit Bias is “Stable”, as strong secular growth in air traffic in India and GHIAL’s monopolistic position are counterbalanced by the large capex required to fund the airport's expansion.  We view GHIAL’s corporate governance as “Moderate” on the LAGA scale. We view favourably the shareholder structure, which includes Airports Authority of India (13%) and the Government of Telangana (13%). A further positive is the good track record of GMR Group, which also owns DIAL. The Board composition is sound, with 4 INEDs (out of 15 Board members), despite the private nature of the business. Our assessment also takes into account the private nature of the business, with few checks and balances.  GHIAL's closest peer is DIAL, which is also has HY bonds outstanding. On the surface, DIAL looks better than GHIAL, especially in terms of the scale of the business. Based on a detailed analysis, however, we believe GHIAL is on par, or even a slightly better credit, with less regulatory risk, more stable EBITDA margins and lower leverage. As a result, we expect the proposed 10-year Notes to price at 4.75%, and recommend investors to participate at or above this level. 

GMR Hyderabad - New Issue Snapshot - Lucror Analytics

India

GMR Hyderabad International Airport Limited provides infrastructure construction and development services. The Company constructs and develops airports, solar energy plants, sports stadium, colleges and schools, roads, metros, and other transportation projects. GMR Hyderabad International serves customers worldwide.

GMR Hyderabad International Airport (7174677Z IN)

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GMR Hyderabad - New Issue Snapshot - Lucror Analytics

We view GMR Hyderabad (GHIAL) as “Low Risk” on the LARA scale, due to low business risk and a manageable financial risk profile. GHIAL is...

Lucror Analytics