AI Assets Holding Limited Issuer Summary

Report date: 2026-05-22
Issuer: AI Assets Holding Limited
User-specified ticker: AIAHIN
Common issuer abbreviation in official materials: AIAHL
Relevant bond issuer: AI Assets Holding Limited
Bond structure reference: Government of India-guaranteed Indian rupee NCD programme

1. Business Snapshot and Recent Developments

AI Assets Holding Limited (AIAHL) is a 100%-Government of India-owned asset-holding and debt-resolution SPV established after the privatisation of Air India. It is not a conventional airline, airport operator, or aviation services company. The starting point for credit analysis is that AIAHL is not a company that generates earnings from its own airline operations to repay debt. Rather, it is a vehicle that manages non-core assets carved out from the former Air India, shares in subsidiaries, certain liabilities and receivables, retiree medical-related payments, and asset disposals in line with the Government’s policy objectives.

According to its official website, AIAHL was incorporated on 22 January 2018 as a Government of India special-purpose company, with its registered office at the AI Administration Building, Safdarjung Airport, New Delhi. On issuer naming, the user-specified ticker is AIAHIN, but official materials and rating documents use the abbreviation AIAHL. This report refers to the issuer as AIAHL.

The most important point in assessing AIAHL’s credit profile is that its NCDs are premised on credit enhancement from the Government of India. On 28 January 2026, ICRA reaffirmed [ICRA]AAA (CE) (Stable) for AIAHL’s Rs.14,985 crore NCD programme. In the same ICRA material, the rating without explicit credit enhancement was stated as [ICRA]BB. This gap explains almost the entire credit analysis of AIAHL. The credit quality of the guaranteed NCDs is materially uplifted by the Government of India guarantee and the payment mechanism, but AIAHL’s standalone earnings capacity, capital and liquidity do not by themselves support a high credit profile.

The most recent published financial statements are the unaudited standalone results for the quarter and nine months ended 31 December 2025, approved by the Board on 10 February 2026. For the nine-month period, total income was Rs.875.74 crore, finance costs were Rs.834.34 crore, and the loss after tax was Rs.71.72 crore. In the audited standalone results for FY2025, total income was Rs.1,613.48 crore and profit after tax was Rs.257.22 crore, indicating that the earnings cushion in 9M FY2026 has weakened relative to the prior full year. However, this change alone should not be used to materially reframe the credit quality of the guaranteed NCDs. Payments on the guaranteed bonds depend not on AIAHL’s standalone operating profit, but on the Government guarantee, budgetary allocation, and the payment mechanism through the designated account.

As of end-December 2025, AIAHL’s net worth was Rs.1,255.40 crore, debt-equity ratio was 11.94x, DSCR was 0.05x, and ISCR was 0.91x. For a conventional operating company or financial institution, these standalone metrics would be very weak. However, AIAHL is not a company established to maximise profit through commercial activities; it is a Government-owned SPV that receives the financial restructuring legacy of the former Air India. Therefore, while the weak standalone metrics are an important constraint, the Government guarantee functions as the central credit enhancement for principal and interest payments on the guaranteed NCDs.

Government budgetary support is also observable. In the Government of India’s FY2025-26 budget, Demand No.8 of the Ministry of Civil Aviation included a budget allocation of Rs.1,025.51 crore for Air India Asset Holding Limited (SPV). The explanatory text states that this expenditure is for the repayment of loans and interest on loans transferred to AIAHL as part of Air India’s financial restructuring. In the FY2026-27 budget, the same item declines to Rs.758.39 crore. The continuation of the budget item is a confirming factor for payment execution, but the decline in the amount should not be interpreted as either an improvement or a deterioration until it is reconciled with the remaining principal and interest payment schedule and current outstanding balance.

AIAHL’s corporate profile can be summarised as follows.

The conclusion should not be rushed into describing AIAHL as “a high-credit-quality operating company close to the Government of India.” More accurately, it should be understood as a two-layer credit: “AIAHL is weak on a standalone basis, but specific NCDs have high credit quality because of explicit credit enhancement and a payment mechanism provided by the Government of India.”

2. Policy Position and Institutional Linkage

AIAHL’s policy role lies in the post-privatisation resolution of Air India. For many years, Air India, as a state-owned airline, carried substantial debt, non-core assets, subsidiaries, and retiree-related obligations. To complete the privatisation, it was necessary to separate the airline business needed for ongoing operations from the non-core assets, liabilities and policy-related burdens accumulated during the former state-owned period. AIAHL is the vehicle established for this separation, and its role is to process the Government of India’s residual responsibility after privatisation in financial and operational terms.

The Ministry of Civil Aviation’s page on AIAHL states that AIAHL was created with the objective of acquiring from Air India the shareholdings in entities such as AI Airport Services Limited, AI Engineering Services Limited, Alliance Air Aviation Limited and Hotel Corporation of India Limited. AIAHL’s own Overview page also states that the company is an SPV incorporated by the Government of India, with authorised and paid-up capital, and is 100% owned by the President of India. Therefore, in analysing AIAHL’s credit profile, it is important to consider not only the formal identity of the owner but also why the Government needs to maintain this company.

Its policy importance is high, but AIAHL is not an operating company like PLN, KEPCO, a power utility, or an airport operator, where an interruption in daily service provision would immediately affect social functions. AIAHL’s importance is not in the immediate supply of public services, but in financial resolution after Air India’s privatisation, orderly repayment of Government-guaranteed debt, disposal of non-core assets, restructuring of subsidiaries, and settlement of policy-related burdens such as retiree medical expenses. From a credit perspective, this implies a very strong Government linkage, but one of a different nature from stable operating cash flow.

This distinction is important for bond investors. Among government-related issuers, there are companies that are merely government-owned, companies that perform policy functions, and companies where explicit guarantees attach to specific debt. In AIAHL’s case, the strongest credit element is not merely “Government ownership” but the fact that the Government of India provides an irrevocable and unconditional guarantee for specific NCDs. Government ownership raises support likelihood, but the credit quality of the guaranteed NCDs is directly supported by the guarantee agreement and payment mechanism.

At the same time, AIAHL still carries policy-related burdens. Unconfirmed balances with Air India or subsidiaries, asset sale procedures, medical expenses for former Air India retirees, contingent obligations related to Alliance Air, and progress on subsidiary divestments create complexity that does not exist for a conventional operating company. Even if these burdens are ultimately of a nature to be resolved by the Government, they can appear as temporary distortions in AIAHL’s standalone profit and loss and cash management.

Therefore, AIAHL’s policy linkage is both a support for credit quality and a factor that makes the company difficult to evaluate as a conventional operating company. The questions investors should ask are not “Is AIAHL’s business competitive?” but rather: “Does the payment mechanism for the Government-guaranteed NCDs operate as contracted?”, “Are Government budgetary allocations continuing?”, and “Could non-guaranteed debt or contingent liabilities interfere with payment execution on the guaranteed NCDs?”

3. Asset, Subsidiary and Resolution Profile

Analysing AIAHL’s segments as normal revenue and profit segments would lead to an incorrect credit assessment. AIAHL itself has almost no commercial operating revenue. Its financial statement income comprises property rentals, Government grants, interest income on receivables from associates, subsidiaries and Air India-related parties, and other income. The subsidiaries include aviation services, maintenance, regional aviation and hotels, but these should not be assumed to be the main repayment source for the guaranteed NCDs. The subsidiaries are relevant for understanding future disposal value, contingent obligations and the Government’s restructuring policy.

The AIAHL group includes AI Engineering Services Limited, AI Airport Services Limited, Alliance Air Aviation Limited and Hotel Corporation of India Limited. The official Subsidiaries page describes AIASL as a company providing ground-handling services across India, AIESL as a large MRO provider responsible for aircraft and engine maintenance, Alliance Air as a regional airline and UDAN-related operator, and HCI as a company with hotel and inflight catering-related businesses. These businesses were transferred to AIAHL as non-core and peripheral functions of the former Air India group, and have a strong character as assets slated for resolution or potential divestment after privatisation.

The Chairman’s Statement for FY2023-24 states that the AIAHL group reported consolidated net profit of Rs.900.80 million, turning profitable from a consolidated net loss in the previous year. However, this improvement was driven mainly by the improvement in AIAHL’s standalone performance, and does not mean that all subsidiaries became stable sources of profit; there is considerable variation across subsidiaries. AIESL reported revenue of Rs.21,803.53 million and net profit of Rs.2,357.28 million in FY2023-24. By contrast, Alliance Air reported revenue of Rs.9,625.53 million and a net loss of Rs.6,195.58 million, making it the heaviest loss contributor within the group.

The subsidiary overview and credit implications are as follows. Subsidiary figures are shown in Rs million as stated in the Chairman’s Statement, which differs from the Rs crore unit used in AIAHL’s standalone financial tables.

The notes to the FY2026 third-quarter results state that Rs.1,634.97 million recoverable from Air India Limited remained unconfirmed as of 31 December 2025. Management considers the amount recoverable, but accounting adjustments may be made depending on the outcome of confirmation and reconciliation. In relation to Alliance Air, aircraft lessors invoked 13 SBLCs on 24 and 25 November 2025, leading AIAHL to recognise Rs.1,704.20 million as recoverable from Alliance Air. This indicates that corporate guarantees and SBLCs/BGs issued by AIAHL to subsidiaries carry contingent risk that goes beyond a mere asset-holding company.

Real estate disposal is also important, but should not be treated as an excessive source of credit support. AIAHL classifies its real estate holdings as assets held for sale, and the notes to the December 2025 financial results state that the Nariman Point building is in the process of being sold together with leasehold rights. For some properties, registration, transfer deeds, local authority approvals, litigation and arbitration procedures remain pending. Asset disposals may be an auxiliary factor that reduces the amount of required Government support, but the primary repayment basis for NCD holders is the Government guarantee.

The conclusion of this section is clear. AIAHL’s subsidiaries, real estate and receivables affect future value recovery and contingent risks, but they do not by themselves explain the credit quality of the guaranteed NCDs. Overweighting subsidiary value as a repayment source would misread AIAHL’s credit structure. Investors should recognise that progress on asset disposals could reduce the budgetary burden on the Government, while keeping the Government guarantee and payment mechanism at the centre of the credit assessment of the guaranteed bonds.

4. Financial Profile and Analysis

AIAHL’s standalone financials do not independently support the high rating of the guaranteed NCDs. Rather, the financial statements show that the issuer is heavily dependent on the Government guarantee. FY2025 total income was Rs.1,613.48 crore and profit after tax was Rs.257.22 crore, with the company remaining profitable. However, finance costs were heavy at Rs.1,105.81 crore, and most income is not ordinary operating revenue but comprises rent, Government grants, interest income and other income.

ICRA notes that AIAHL’s operating income includes Government grants and rent. This reflects AIAHL’s character as an SPV rather than a commercial operating company. Therefore, operating margins and revenue growth should not be evaluated in the same way as for a conventional operating company. What matters is the extent to which income is supported by Government grants, the extent to which the company can absorb finance costs from its own resources, and how asset disposals, subsidiary receivables and Government budgetary allocations complement cash management.

Key metrics are as follows. ICRA’s table is in Rs crore, while AIAHL’s financial results are presented in Rs million; this report converts them into Rs crore for comparability. However, ICRA’s operating income, OPBDIT and related figures are rating-agency adjusted metrics and are not exactly the same definition as AIAHL’s total income in its financial statements.

The most important point in this table is not income or profit, but the heavy interest and debt burden. FY2025 profit after tax was Rs.257.22 crore, but finance costs were Rs.1,105.81 crore. It is difficult to conclude that the company could repay the remaining NCDs stably from standalone cash generation alone. In 9M FY2026, finance costs were Rs.834.34 crore, while loss after tax was Rs.71.72 crore. ISCR was 0.91x and DSCR was 0.05x, which would be very weak under a conventional credit assessment.

At the same time, it would also be insufficient to conclude AIAHL’s financial profile solely from weak standalone metrics. AIAHL’s financials are complicated by Government grants, asset disposals, receivables from Air India and subsidiaries, and accounting treatment of former Air India-related obligations. For example, the 9M FY2026 notes state that other income for October-December 2025 included Rs.344.65 million of accrued Government of India grant related to medical expenses for Air India retirees, and Rs.300.00 million of Government grant received on 5 December 2025. It also included Rs.1,431.29 million of interest income on the average balance of amounts recoverable from subsidiaries and other entities.

Therefore, AIAHL’s profit and loss is driven less by operating competitiveness and more by Government grants, interest on receivables, asset disposals and the timing of accounting recognition. FY2025 profitability and the 9M FY2026 loss should not be read like the ups and downs of a conventional operating company, but rather as accounting volatility associated with the management of Government-guaranteed debt. However, precisely because this volatility exists, AIAHL’s standalone credit quality is not viewed as high.

There are also many asset-side items to confirm. Amounts recoverable from Air India Limited, amounts recoverable from subsidiaries, reconciliation differences in GST input tax credit, assets held for sale, the Nariman Point property sale process, and incomplete registration and transfer of former Air India-related real estate may continue to affect accounting adjustments and the timing of cash recovery. The auditors’ limited review highlighted, as emphasis-of-matter items, pending balance confirmations with subsidiaries and Air India Limited, reconciliation of GST input tax credit, and the impact of new labour laws as of end-December 2025.

The conclusion on the financial profile is that the credit quality of the guaranteed NCDs and AIAHL’s standalone credit quality must be clearly separated. On a standalone basis, AIAHL has high leverage, thin interest coverage, and income quality that depends on Government grants and interest on receivables. Therefore, AIAHL without credit enhancement is difficult to view as a high-credit-quality issuer. By contrast, the guaranteed NCDs are substantially supported through the Government guarantee and payment mechanism, which materially offsets this standalone weakness.

5. Structural Considerations for Bondholders

For holders of the guaranteed NCDs, the central issue is not AIAHL’s financial statements themselves, but how the Government guarantee and payment mechanism operate. ICRA’s report dated 28 January 2026 states that the rating on the NCD programme is based on an irrevocable and unconditional guarantee from the Government of India through the Ministry of Civil Aviation. According to ICRA’s rating report, the guarantee is legally enforceable, irrevocable and unconditional; covers the full amount and entire tenor of the relevant NCDs; and has a pre-defined guarantee invocation and payment mechanism. This report has not directly reviewed the guarantee agreement itself, so the legal assessment relies on ICRA’s description.

The key structural points are as follows.

The payment mechanism described by ICRA is not merely implicit support; it has pre-maturity funding checks and guarantee invocation procedures. The trustee notifies AIAHL of the payment date and required amount 45 days before each payment date. AIAHL must ensure that the required funds are available in the designated account at least 30 days before the payment date. If funds are insufficient by 30 days before payment, an event of default occurs and the trustee can notify the Government of India. If the shortfall continues until eight business days before the payment date, the trustee invokes the guarantee, and the Government of India is required to deposit the required funds into the designated account at least one business day before the payment date.

This process is designed so that the Government guarantee is funded before the payment date even if AIAHL’s standalone cash is temporarily insufficient. This is very important from a credit perspective. The structure does not merely provide a guarantee; it specifies when and by whom a shortfall is identified, who notifies the Government, and by when the Government must transfer funds, thereby reducing payment-delay risk.

However, the structure should not be over-relied upon without further checks. First, this report has not reviewed the full text of the guarantee agreement or the individual offering and issuance documents. ICRA’s summary of the guarantee structure is strong, but investors should check the terms of the individual bonds, guarantee scope, treatment on acceleration, taxation, paying agent arrangements, dispute resolution and governing law. Second, ICRA’s [ICRA]AAA (CE) is an assessment of the specific NCDs under the rated structure, and does not mean that all of AIAHL’s debt or obligations carry the same credit quality. Third, the Government guarantee is a very strong credit enhancement, but payment execution still depends on budgetary allocations, the designated account, and compliance with trustee procedures.

For an issuer such as AIAHL, it is necessary to distinguish clearly between the types of Government support. 100% Government ownership is an ownership-based support expectation. The Ministry of Civil Aviation’s budgetary allocation is support for payment execution. The Government of India guarantee is legal credit enhancement for the relevant NCDs. The credit enhancement incorporated by the rating agency is its rating assessment based on these factors. Simply describing the issuer as “safe because it is government-related” would be too coarse as credit analysis.

For bondholders, the most direct protection is the Government guarantee and pre-maturity payment mechanism. Subsidiary value, asset disposal proceeds and AIAHL’s standalone income remain auxiliary factors. This is why the guaranteed NCDs can carry a high rating despite weak standalone metrics at AIAHL.

6. Capital Structure, Liquidity and Funding

AIAHL’s capital structure was formed as a result of the former Air India debt restructuring. According to ICRA, AIAHL issued bonds of Rs.21,985 crore to refinance certain Air India debt. In addition, Rs.7,400 crore of NCDs and Rs.7,000 crore of fully serviced Government bonds have reportedly been redeemed in the past. The NCD programme currently rated by ICRA is Rs.14,985 crore.

AIAHL’s official Details of Bonds Issued page lists the main NCD series as follows.

Based on the official bond list and ICRA’s rated amount, Series-2 and Series-3 mature in October 2029. To the extent current balances remain outstanding, payment preparation for that month will be important. Looking at AIAHL’s standalone financial metrics, there is limited capacity to repay these obligations from internal resources. As of end-December 2025, the debt-equity ratio was 11.94x, total debt to total assets was 0.92x, and finance costs reached Rs.834.34 crore for the nine-month period. For a conventional company, this level would need to be treated as a major refinancing and repayment risk.

However, for AIAHL’s guaranteed NCDs, a shortfall in standalone cash flow does not directly imply bond default. Payment execution is supplemented by the Government budget, designated account, trustee and guarantee invocation procedures. The Government budget includes Rs.1,025.51 crore for AIAHL in FY2025-26, Rs.945.51 crore in the FY2025-26 revised estimate, and Rs.758.39 crore in the FY2026-27 budget. The explanatory text clearly states that the allocation is for payment of loans transferred to AIAHL as a result of Air India’s financial restructuring.

The decline in this budget amount does not, by itself, directly indicate either improvement or deterioration. It may reflect a reduction in required Government payments as remaining debt amortises, but no conclusion is drawn because current outstanding balance, payment dates, interest and principal amortisation schedules have not been reconciled. At this stage, ICRA reaffirmed the rating in January 2026 and evaluated budgetary allocations and the payment mechanism as credit enhancement, so the continuation of the budget item is treated as a confirming factor. However, a future reduction or removal of budget items, failure to fund the designated account before payment dates, or delay in the guarantee invocation process would be a significant downside risk.

AIAHL’s sources of liquidity can be divided into three categories. The first is Government budgetary support and the guarantee, which form the central payment source for the guaranteed NCDs. The second is AIAHL’s internal income, such as rentals, asset disposal proceeds and interest income. According to the FY2023-24 Chairman’s Statement, AIAHL received rental income of Rs.1,193.82 million and asset disposal proceeds of Rs.623.60 million during the year, which partly reduced the required amount of Government grant. The third is amounts recoverable from subsidiaries and Air India-related parties. However, this third element involves uncertainty over confirmation, reconciliation and timing of recovery.

Among these three, the primary pillar for the guaranteed NCDs is clearly the Government budget and guarantee. Rentals and asset disposal proceeds are auxiliary funding sources that may reduce the Government burden, but they cannot be placed at the centre of payment certainty. Receivables from subsidiaries and Air India-related parties may be recoverable, but given that the auditors highlight pending balance confirmations as an emphasis-of-matter item, they should not be assumed to be the main repayment source.

Therefore, AIAHL’s liquidity assessment is: weak on a standalone basis, but supplemented by the Government guarantee and budgetary support for the guaranteed NCDs. Standalone liquidity should not be ignored. The weaker the standalone cash position, the more important accurate execution of Government payment procedures becomes. Investors should continue to monitor the annual Union Budget, Ministry of Civil Aviation Demand for Grants, rating updates from ICRA and India Ratings, NCD payment records, and funding of the designated account.

7. Rating Agency View

ICRA’s view gives the clearest expression of AIAHL’s credit structure. In its report dated 28 January 2026, ICRA reaffirmed [ICRA]AAA (CE) (Stable) for AIAHL’s Rs.14,985 crore NCD programme. CE denotes explicit credit enhancement, and the rating is specific to the relevant NCDs and their structure. ICRA assigns a rating without the guarantee of [ICRA]BB, clearly separating AIAHL’s general standalone credit quality from the credit quality of the guaranteed NCDs.

ICRA’s rationale for the high rating is the irrevocable and unconditional guarantee from the Government of India, the pre-payment funding mechanism, the budgetary allocation through the Ministry of Civil Aviation, and the Government’s track record of supporting coupon payments and redemptions. ICRA assesses that because the Government guarantee covers the full amount and full tenor of the relevant debt, and because guarantee invocation procedures are pre-defined, the structure is sufficient to uplift the rating on the relevant NCDs to [ICRA]AAA (CE).

At the same time, although ICRA assesses AIAHL’s standalone liquidity as “Adequate,” the credit quality of the NCDs itself depends on the Government guarantee. AIAHL on a standalone basis depends on rental income, Government grants, and receivables from subsidiaries and Air India-related parties, while commercial activities are limited. In ICRA’s key metrics, total debt/OPBDIT was 16.7x and interest cover was 0.8x in FY2025, which are weak for a conventional high-rated issuer.

ICRA’s rating sensitivity also states that rating pressure could arise if the counterparties involved in the NCD structure fail to adhere to the structure. This indicates that the core of the rating is not merely small movements in AIAHL’s profit and loss, but rather the Government guarantee, payment account, guarantee invocation procedures and performance by the relevant parties.

The notes to AIAHL’s FY2026 third-quarter financial results disclose that the company’s NCDs are rated [ICRA]AAA(CE) (Stable) by ICRA and IND AAA(CE)/Stable by India Ratings and Research. However, this report has not reviewed the full detailed rating report from India Ratings; it is limited to confirming the rating level disclosed in AIAHL’s financial statement notes. The detailed rating rationale, view on the guarantee structure and sensitivities are items for future confirmation.

Translating the rating agency view into an internal credit view, AIAHL is an issuer that is “weak on a standalone basis, but very strong for the guaranteed NCDs.” Investors should not infer from the rating symbol alone that AIAHL is high-credit-quality on a standalone basis, but must confirm which debt is Government-guaranteed and which obligations or burdens are outside the guarantee or remain unconfirmed.

8. Credit Positioning

AIAHL’s guaranteed NCDs should be positioned not as conventional Indian corporate bonds, but as credit-enhanced bonds that rely heavily on an explicit Government guarantee. Market prices and spreads have not been confirmed, so no conclusion is drawn on relative value. However, the nature of the credit risk differs materially from that of ordinary government-related corporate bonds, state-owned enterprise bonds, or aviation operating company bonds.

For a conventional state-owned enterprise bond, support likelihood is assessed based on Government ownership, policy importance, past support record and indispensability of the business. In AIAHL’s case, in addition to these factors, the relevant NCDs have an explicit Government of India guarantee. In this respect, the legal credit enhancement is stronger than that of a mere government-related corporate bond. By contrast, non-guaranteed AIAHL debt and contingent obligations should not be assessed at the same credit level.

Even among government-related issuers, AIAHL is not a company with ongoing operating earnings and public-service characteristics like a power utility, airport, railway or policy financial institution. AIAHL’s purpose is to complete the financial restructuring of the former Air India, and it is more of a vehicle that gradually runs down assets and liabilities to be resolved than a long-term growth-oriented operating company. Therefore, in credit analysis, it is more important to track the balance of guaranteed debt, Government budgetary allocations, asset disposals, subsidiary divestments and contingent liability resolution than growth or profitability.

The following comparison axes are useful for investment assessment of the guaranteed NCDs.

AIAHL’s guaranteed NCDs rely heavily on the Government of India guarantee as a matter of credit risk. Therefore, the main downside pressures relate less to poor operating performance at AIAHL and more to non-compliance with the guarantee structure, the Government of India’s credit quality and budgetary support, and delays in payment procedures. Conversely, improvements in AIAHL’s standalone financials, asset sales and subsidiary divestments may reduce the Government burden, but they are not major sources of further credit uplift for the guaranteed NCDs, because substantial credit enhancement is already present.

9. Key Credit Strengths and Constraints

The greatest credit strength of AIAHL’s guaranteed NCDs is the explicit guarantee from the Government of India. In ICRA’s rating report, this guarantee is described as irrevocable, unconditional, legally enforceable, and covering the full amount and full tenor of the relevant NCDs. The guarantee invocation process is also specified, with the trustee identifying a shortfall before the payment date and invoking the guarantee from the Government if necessary. This report has not directly reviewed the guarantee agreement, but based on the structure summarised by the rating agency, this is stronger credit enhancement than mere implicit support.

The second strength is the continuation of Government budgetary allocation. Budget items for AIAHL are identifiable in the FY2025-26 budget, the revised estimate for the same year, and the FY2026-27 budget. The budget explanation states that the allocation is for payment of loans transferred to AIAHL as part of Air India’s financial restructuring. This indicates that payment of the guaranteed debt is embedded in the Government budget process.

The third strength is that AIAHL is a 100%-Government-owned policy-purpose company. Processing the assets, liabilities, subsidiaries and retiree obligations after Air India’s privatisation is not something that a private company would voluntarily assume; it is close to a policy responsibility of the Government. Therefore, the Government of India has a strong incentive to proceed with orderly debt resolution through AIAHL.

The fourth strength is auxiliary recovery potential from asset disposals and subsidiary divestments. AIAHL has non-core real estate, subsidiary shares and receivables related to Air India and subsidiaries. Progress on disposal and recovery of these items could reduce the Government’s budgetary burden. However, this strength should be treated as an auxiliary recovery element, not as the primary repayment source for the guaranteed NCDs.

The largest constraint, meanwhile, is AIAHL’s weak standalone credit quality. FY2025 finance costs were Rs.1,105.81 crore, the debt-equity ratio at end-FY2025 was 11.29x, and 9M FY2026 DSCR and ISCR were 0.05x and 0.91x, respectively. The company has almost no operating income from commercial activities, and income depends on Government grants, rent, interest on receivables and other income. Without the guarantee, the company’s debt burden is heavy.

The second constraint is uncertainty over balance confirmation, recovery and accounting treatment. There are many unresolved items, including amounts recoverable from Air India Limited, amounts recoverable from subsidiaries, GST input tax credit, invocation of Alliance Air-related SBLCs/BGs, and registration and transfer procedures for former Air India real estate. These issues are not of a nature that would directly stop payment on the guaranteed NCDs, but they could affect AIAHL’s standalone financials and the Government burden.

The third constraint is performance divergence among subsidiaries. AIESL and AIASL are profitable, but Alliance Air and HCI are loss-making. Alliance Air in particular is highly policy-oriented; while it performs regional aviation functions, losses and contingent obligations remain. AIAHL’s ownership of subsidiaries may support asset value, but subsidiary losses and guarantee invocations can also be constraints.

The fourth constraint is that debt and contractual terms outside the guaranteed NCDs are not sufficiently confirmed. ICRA’s rating applies to specific NCDs, and not all of AIAHL’s obligations are protected by the same guarantee. Investors must confirm individually whether the bonds they hold or intend to purchase fall within the guarantee scope.

Finally, because the structure depends on the Government of India guarantee, the Government’s own credit quality, fiscal position, budgetary process and sovereign rating are important. Changes in the Government of India’s credit quality or willingness to honour guarantees may have a stronger effect on the market valuation of the guaranteed NCDs than changes in AIAHL’s standalone profile.

10. Downside Scenarios and Monitoring Triggers

AIAHL’s downside scenarios should be considered not only in terms of deterioration in standalone financials, but primarily in terms of disruption to the payment structure for the guaranteed NCDs. AIAHL is already weak on a standalone basis, so a loss in a single year does not necessarily require an immediate change in credit view on the guaranteed NCDs. The issue is whether the Government guarantee, budgetary allocation and payment procedures that offset this weakness cease to function.

The first downside trigger is failure of the payment mechanism. Events such as failure to fund the designated account before the payment date, improper trustee notification, delay in guarantee invocation, or failure of Government fund transfers to arrive by the payment date would directly affect the credit quality of the guaranteed NCDs. ICRA also states that rating pressure could arise if the parties involved fail to comply with the NCD structure.

The second trigger is insufficient budgetary allocation. At present, the FY2026-27 budget still includes expenditure for AIAHL. However, if future budgets do not secure the required amount, if the revised estimate is materially reduced, or if budget execution is delayed relative to payment dates, these would be important warning signs for bondholders. A decline in the budget amount itself should be evaluated only after reconciling it with the remaining principal and interest payment schedule and current outstanding balance; the credit view should not be determined solely by increases or decreases in the amount.

The third trigger is deterioration in the credit quality of the Government of India. The rating of AIAHL’s guaranteed NCDs depends heavily on the Government guarantee. Therefore, downward pressure on India’s sovereign rating, fiscal deterioration, doubts over guarantee performance, or institutional delays in Government payments are more important than AIAHL’s standalone financials.

The fourth trigger is expansion of AIAHL’s standalone contingent obligations. If AIAHL assumes subsidiary-related obligations, as seen in the invocation of Alliance Air-related SBLCs/BGs, its standalone financials could weaken further. Even if the guaranteed NCDs carry a Government guarantee, an increase in AIAHL’s standalone burden and the required amount of Government support would heighten dependence on budgetary allocations and policy decisions.

The fifth trigger is a prolonged delay in asset disposals and subsidiary divestments. AIAHL is expected to reduce the Government burden through asset disposals and subsidiary restructuring. If the sale, registration, transfer, litigation/arbitration procedures and local authority approvals for real estate, including the Nariman Point property, are delayed, internal cash recovery will be pushed back. Delays in the divestment or restructuring of AIESL, AIASL, AAAL and other entities would also make subsidiary losses and contingent burdens more likely to persist.

The sixth trigger is balance confirmation and accounting adjustment. If balance confirmations with Air India Limited and subsidiaries remain unresolved for an extended period and ultimately require write-offs or significant accounting adjustments, AIAHL’s standalone net worth and earnings could deteriorate further. Even if there is no immediate pass-through to the guaranteed NCDs, this would affect the view of the pre-enhancement rating and the Government burden.

Monitoring items can be organised as follows.

The typical combination that would worsen the credit view would be simultaneous evidence of insufficient Government budgetary allocation, delays in funding the payment account, disorder in guarantee invocation procedures, deterioration in the Government of India’s credit quality, and expansion of AIAHL’s standalone contingent obligations. Conversely, if budgetary allocations continue, NCD payments are made on time, balance confirmations and asset disposals progress, and remaining debt declines, the credit view on the guaranteed NCDs is more likely to remain stable.

11. Credit View and Monitoring Focus

At present, AIAHL’s guaranteed NCDs carry the highest CE-enhanced rating on ICRA’s domestic scale for the relevant NCDs. However, this is a debt-specific assessment incorporating the Government of India guarantee, not a standalone assessment of AIAHL. The direction of credit quality is stable as long as the guarantee structure and Government budgetary allocations are maintained, but AIAHL’s standalone financials are weak, and dependence on Government support will continue if asset disposals and subsidiary resolution are delayed. The likelihood of a rapid change in credit quality is not high under normal conditions, but problems with the practical operation of the Government guarantee, budgetary support, or the Government of India’s credit quality could move the assessment of the guaranteed NCDs faster than changes in AIAHL’s standalone financials.

The strongest basis for this view is the clarity of the Government guarantee. In ICRA’s rating report, the guarantee is assessed as irrevocable, unconditional, legally enforceable, and covering the full amount and full tenor of the relevant NCDs. In addition, the procedures for pre-maturity funding confirmation in the designated account, trustee notification, guarantee invocation and Government fund transfer are specified. This report is not an independent contract review, but as long as the mechanism summarised by ICRA is maintained, AIAHL’s standalone weakness does not directly impair the payment credit quality of the guaranteed NCDs.

The second basis is the observable Government budgetary allocation. The FY2025-26 and FY2026-27 Union Budgets include items for AIAHL, and the stated purpose of the expenditure is repayment and interest payment of loans transferred to AIAHL as part of Air India’s financial restructuring. This indicates that payment of the guaranteed debt is embedded in the Government budget process. As long as the Government maintains this expenditure item and funds are transferred before payment dates, payment risk on the guaranteed NCDs should remain low.

By contrast, AIAHL’s standalone credit quality is weak. The 9M FY2026 loss, low DSCR, high debt-equity ratio and thin interest coverage show that AIAHL is not an issuer with high credit quality from its own resources. Therefore, AIAHL reports must continue to separate the credit view on the guaranteed NCDs from the view on the company’s standalone financials and contingent obligations. Even if AIAHL’s standalone metrics improve, upside for the guaranteed NCDs is limited because they are already materially enhanced by the Government guarantee. Even if standalone metrics deteriorate, the guaranteed NCDs do not necessarily deteriorate by the same magnitude, provided the guarantee structure remains intact.

For investors, the most important monitoring focus is performance of the Government guarantee and budgetary support. Specifically, investors should check the AIAHL item in the Union Budget, rating updates from ICRA and India Ratings, NCD payment records, BSE disclosures, and the notes to AIAHL’s financial statements. Based on the official bond list and ICRA’s rated amount, Series-2 and Series-3 mature in October 2029. To the extent current balances remain outstanding, budgetary provision for maturity funding, funding of the designated account and confirmation of the guarantee invocation process will be important.

The second monitoring focus is AIAHL’s standalone contingent obligations. Balance confirmations with Air India Limited and subsidiaries, invocation of Alliance Air-related SBLCs/BGs, retiree medical expenses, GST input tax credit reconciliation and asset sale procedures are not the primary repayment source for the guaranteed NCDs, but they affect AIAHL’s standalone financials and the Government burden. In particular, Alliance Air continued to record a large net loss in FY2023-24, and as a highly policy-oriented subsidiary, it requires continued monitoring for possible additional support or guarantee obligations.

The third monitoring focus is asset disposals and subsidiary divestments. AIAHL is not a long-term growth company; it is a company established to resolve non-core assets and debt related to the former Air India. Therefore, for the credit view to remain stable, it is preferable that remaining debt payments proceed, the required amount of Government support declines, and asset disposals and subsidiary restructuring advance in an orderly manner. Delays in asset disposals would not immediately undermine the payment credit quality of the Government-guaranteed NCDs, but if the Government burden is prolonged, dependence on budgetary and policy decisions will remain.

The practical credit view at present is that, from a credit perspective, AIAHL’s standalone financial weakness alone does not require the credit view on the guaranteed NCDs to deteriorate by the same degree. However, this view applies only to the Government-guaranteed NCDs, and non-guaranteed obligations of AIAHL or subsidiary credit should not be treated in the same way. For individual bond investments, it is essential to confirm that the relevant bond is indeed within the scope of the ICRA/India Ratings CE rating and the Government guarantee.

No conclusion is drawn on relative value because market prices, yields, spreads and comparisons with Indian government-related bonds of similar tenor have not been confirmed. Viewed purely from a credit perspective, NCDs with a clear Government guarantee have strong credit enhancement, but investment merit cannot be judged without checking liquidity, tax treatment, investor base, redemption date and spread against same-country, same-tenor bonds. In the next review, the current prices, yields, outstanding amounts and trading liquidity of Series-2 and Series-3 should be confirmed.

12. Short Summary & Conclusion

AI Assets Holding Limited is a 100%-Government of India-owned SPV responsible for resolving the former Air India’s non-core assets, subsidiaries and debt; it is not a conventional airline. AIAHL’s standalone financials are weak, but its main NCDs benefit from high credit enhancement through an explicit Government of India guarantee and a pre-maturity payment mechanism. Investors need to separate the credit quality of the guaranteed NCDs from AIAHL’s standalone credit, and monitor Government budgetary allocations, NCD payment records, remaining debt, and progress on subsidiary and asset disposals.

13. Sources

Primary sources used in this report:

• AI Assets Holding Limited, Overview
  https://www.aiahl.in/overview.html
• AI Assets Holding Limited, Financial Results page
  https://www.aiahl.in/financial-results.html
• AI Assets Holding Limited, Unaudited Standalone Financial Results for the quarter and nine months ended 31 December 2025, approved 10 February 2026
  https://www.aiahl.in/docs/resources/Finances/Financial-Results-Q3-Dec-2025-26.pdf
• AI Assets Holding Limited, Audited Standalone Financial Results for the quarter and year ended 31 March 2025
  https://www.aiahl.in/docs/resources/Finances/Financial-Results-Q4-march-2024-25.pdf
• AI Assets Holding Limited, Chairman's Statement for FY2023-24
  https://www.aiahl.in/chairman-statement.html
• AI Assets Holding Limited, Details of Bonds Issued
  https://www.aiahl.in/details-of-bonds-issued.html
• AI Assets Holding Limited, Subsidiaries
  https://www.aiahl.in/subsidiaries.html
• Ministry of Civil Aviation, AI Assets Holding Limited page
  https://www.civilaviation.gov.in/index.php/node/4090
• Government of India, Notes on Demands for Grants 2025-2026, Demand No. 8, Ministry of Civil Aviation
  https://www.indiabudget.gov.in/budget2025-26/doc/eb/sbe8.pdf
• Government of India, Notes on Demands for Grants 2026-2027, Demand No. 8, Ministry of Civil Aviation
  https://www.indiabudget.gov.in/doc/eb/allsbe.pdf
• ICRA, "AI Assets Holding Limited: Rating reaffirmed", revised 28 January 2026
  https://www.icra.in/Rating/GetRationalReportFilePdf?id=140547

Unverified / Pending:

• The latest detailed rating report from India Ratings has not been reviewed; this report is limited to confirming the IND AAA(CE)/Stable rating level disclosed in AIAHL’s financial statement notes.
• The full offering and issuance documents for the individual NCDs, the Government guarantee agreement, all terms upon guarantee invocation, treatment on acceleration, and tax, governing law and dispute resolution provisions have not been reviewed.
• The current outstanding balances, trading prices, yields, spreads and liquidity of Series-2 and Series-3 are unconfirmed.
• The audited full-year FY2025-26 financial statements had not been reviewed as of the date of this report.
• Balance confirmations with Air India Limited and subsidiaries, final recovery after the Alliance Air-related SBLC/BG invocation, and the completion timing of asset disposals including the Nariman Point property remain continuing items for confirmation.