Monday, December 22, 2008

CABINET APPROVES FINANCIAL RESTRUCTURING OF KONKAN RLY

Improves Net Worth of the Corporation
In a move that bodes well for Konkan Railway Corporation, the Cabinet Committee on
Economic Affairs (CCEA) has approved KRCL’s proposal on financial restructuring, thus
enabling the Corporation to continue as a PSU even after discharge of its debt liabilities. The
proposal, recommended by the Board of Directors and the Ministry of Railways, was
submitted through BRPSE (Board for Reconstruction of Public Sector Enterprises) for
approval of CCEA (Cabinet Committee on Economic Affairs).
Konkan Railway is the first and the only railway project in the country to be executed on BOT
basis. To enable timely completion of the project, while the Corporation had to resort to
commercial borrowings on a high interest rate, it was not extended any concession like
exemption from payment of dividend during construction phase. Due to this, the debt liabilities
kept mounting. Add to that the losses incurred due to non-materialization of the projected
traffic growth along the route. The Corporation, being a public utility project, was extended
loans by the Ministry of Rlys to meet its debt liabilities.
As per the financial restructuring proposal, the cost of debt provided by Ministry of Railways,
together with interest accrued thereon, will be converted into preferential shares redeemable
at the end of 15 to 20 years. The dividend payable will be non-cumulative at the dividend rate
Ministry of Railways (MoR) pays to Government of India. Any future loans provided by
Ministry of Railways to KRCL will also be converted into non-cumulative redeemable
preferential shares.
The financial assistance will be restricted to the next three years i.e. financial year 2008-09 to
2010-11. In debt servicing, the full interest amount and 50% of the redemption amount will be
made available to KRCL as and when due. These funds paid to KRCL will also be converted
into preferential shares redeemable after 15 years.
Restructuring of the finances would improve the Net Worth and Debt-Equity ratio of KRCL and
make it into a profit making organization soon. The Corporation would be able to meet its
liabilities in future provided the traffic business plan materializes. Therefore the Board of
Directors recommended reviewing the proposed arrangement before the lapse of three years,
as there may be a cause to extend this arrangement for a few more years keeping in view the
unforeseeable future. With this now, Konkan Railway will also be able to bid for big
infrastructure projects.

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