The Hindu Business Line : Allot shares to HUDCO, Debt Tribunal tells CIAL

The Debt Recovery Tribunal, Delhi, has asked the Cochin International Airport Ltd (CIAL) to allocate 26 per cent equity shares to the Housing and Urban Development Corporation (HUDCO) before proceeding with its public issue, sources in CIAL said.

CIAL is currently undertaking a 1:1 rights issue, which will take the paid-up capital of the company from the current Rs 148 crore to Rs 296 crore. The issue, which commenced on May 2 will continue as planned and close on May 31.

An extraordinary general meeting of shareholders was convened to approve the rights issue and to enhance the authorised capital from Rs 200 crore to Rs 400 crore.

"Even after the rights issue, there is sufficient leeway to accommodate the orders of DRT and the interest of HUDCO if need be," the sources added. However, CIAL would be contesting the issue before DRT.

HUDCO officials in Delhi confirmed that DRT has passed an order, stating that CIAL will not allot 26 per cent of its equity - 5.2 crore shares with a face value of Rs 10 each worth Rs 52 crore to anyone.

The background

The case pertains to the Rs 172-crore loan taken by CIAL from HUDCO at an interest rate of 16 per cent. In a one-time settlement, the airport had repaid Rs 120 crore. An agreement was also reached between HUDCO and CIAL to reduce the interest on the outstanding loan and for the airport to convert the Rs 52-crore loan into equity.

CIAL sources said the agreement also stated that the transfer of equity would be completed before March 2004, but that HUDCO cited its inability to accept the equity even on the cut-off date.

Consequently, the airport decided to repay the Rs 52 crore outstanding loan along with an interest burden of Rs 12 crore towards the end of 2004. But HUDCO refused to accept and returned the cheque. CIAL in turn sent a legal notice stating the company was no longer obliged to pay interest on the loan.

Meanwhile, the CIAL shareholders association has filed a petition in the Kerala High Court stating that the airport should not be permitted to issue shares in the company to HUDCO.

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