The Hindu Business Line : Konkan Rly raises Rs 350 cr through bonds

Konkan Railway Corporation Ltd has raised Rs 350 crore through bonds to bring down its cost of finance. The organisation is planning to raise Rs 200 crore through another bond issue later this financial year around November-December.

Konkan Railway has received a Letter of Comfort from the Railway Ministry for the entire bond issue of Rs 550 crore, Dr K.K. Gokhale, Managing Director, Konkan Railway, told Business Line. The Letter of Comfort, which provides the Railway Ministry backing to these bonds, enables Konkan Railway to raise funds at a relatively lower rate.

Bond Issue

Out of the Rs 350 crore, about Rs 300-310 crore has been raised for a ten-year tenor, with a cost of 8.9 per cent. Another Rs 40-50 crore has been raised for five-year tenor at a lower cost of 8.5 per cent, according to senior officials from Konkan Railway. Investors in the bonds include public and private sector banks and some provident fund institutions.

The Rs 350-crore bonds would have a bullet repayment system, which means that Konkan Railway would have to repay the principal amount at the end of the bond tenor. The lead managers include Centrum Finance, AK Capital, Darashaw & Company, UTI, ICICI Securities and Allianz Securities.

The entire Rs 550 crore would be used for redemption of high-coupon bonds. "We would use the funds for redemption of bonds raised with coupons of 12.5-13 per cent," he said. On a cumulative basis Konkan Railways raised Rs 2,600 crore through bonds, at an average cost of 7.5-8 per cent with tenor of about seven-eight years.

Konkan Railway is owned jointly by the Ministry of Railways and the State Governments of Maharashtra and Karnataka. The Railway line was commissioned in 1998. With Rs 630 crore turnover, the organisation registered an operating surplus of Rs 130-crore profit in 2005-06, compared with Rs 80 crore in 2004-05, said Dr Gokhale.

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