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Tuesday, Feb 26, 2002

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HUDCO mulls token equity stake in Cochin airport

Anand Krishnamoorthy

The board of HUDCO is considering token participation in Cochin International Airport Ltd, which would form part of the financial restructuring of the Nedumbassery airport and make it financially strong by mid-2003.

NEW DELHI, Feb. 25

THE Housing and Urban Development Corp Ltd (HUDCO) is considering a proposal to take a token equity stake in Cochin International Airport Ltd, according to HUDCO's Chairman and Managing Director, Mr V. Suresh. This could be done by converting some of the loans it had lent to the country's first private airport into equity, he told Business Line.

The board of the lending institution is considering the move, which would form part of the financial restructuring of the Nedumbassery airport and make it financially strong by mid-2003.

HUDCO has lent Rs 145 crore loans, out of the total Rs 230 crore borrowed by the airport against an equity of Rs 90 crore. "As part of the financial restructuring, there was a request whether we would like to consider converting some portion of the loan into equity, as a token participation. The HUDCO board is considering the issue and we will get back," Mr Suresh said.

Inaugurated in May 1999 and conferred with an international airport status a year later, the Cochin airport has been trying a financial restructuring package by increasing the equity to Rs 200 crore from the existing Rs 90 crore.

UTI Bank Ltd has been appointed as the merchant banker mandated to infuse Rs 110 crore equity into the airport through the private placement route and thereby bring down the debt burden. Earlier, consultancy firm PricewaterhouseCoopers had recommended financial restructuring and exploration of new revenue streams as strategies to turn around the debt-ridden airport, which has about 120 flights a week.

Mr Suresh said the current operational profit of the airport, pegged at about Rs 30 crore, is not sufficient enough to service the annual debt burden of about Rs 34 crore. The Kerala Government, which currently has 51 per cent equity stake in the airport, intends to lower its holding to 26 per cent stake in the expanded equity base of Rs 200 crore. But, even for this, the State Government needs to further pay up another Rs 20 crore, he said.

"It looks like it will be possible to get the additional equity of Rs 110 crore and it does not need to be infused in shot. It could be done in two to three stages," Mr Suresh said.

HUDCO has also suggested the utilisation of extra 340 acres of land available adjacent to the airport for related activities such as hotels, restaurants, warehouses and even banks. "The moment you add these values to the land, it is expected to generate another Rs 250 crore worth of revenue. With the financial restructuring, the (Rs 500) surcharge on ticket and the additional revenues the airport will get solid operational profit from mid-2003," Mr Suresh said.

"At the last board meeting of the airport, HUDCO has also advocated a special area development authority for the substantial amount of land surrounding the Nedumbassery airport," he added.

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