The Hindu Business Line : Rlys may convert loan to Konkan Rly to equity

The numbers
The debt equity ratio of the Konkan Railway would change to 0.76:1 from 6.5:1.
Konkan Railway has external secured loans of Rs 2,625 crore, apart from the Rs 2,627-crore unsecured loan from the Indian Railways.
It has been making operating profits and has been reducing its losses though it is yet to register net profits.

New Delhi , Dec. 20

The Railway Ministry is considering a proposal wherein it would convert its loan of Rs 2,627 crore extended to Konkan Railway Corporation Ltd into preferential equity.

This would improve the balance sheet of Konkan Railway by changing the debt equity ratio of the Konkan Railway Corporation to 0.76:1 from 6.5:1.

As of now, Konkan Railway has an equity element of Rs 803 crore and a total debt of Rs 5,253 crore. While 51 per cent of the Konkan Railway equity is owned by the Indian Railways, 49 per cent is held by four State governments — Maharashtra, Goa, Karnataka and Kerala.

"The whole restructuring proposal is based on the fact that this is a strategic rail link functioning without any state support," said sources. Further details of the proposal are still being worked out. "From an Indian Railways perspective, the move would mean increasing its risk in the Konkan Railway," they said.

DEBT AND COST

On the debt side, Konkan Railway has external secured loans of Rs 2,625 crore, apart from the Rs 2,627-crore unsecured loan from the Indian Railways. While secured loans are backed by collaterals, unsecured loans are not. The external loan component basically consists of Konkan Railways' bond issue of Rs 2,600 crore at an average cost of about 7.5 per cent with tenor of about seven to eight years. For loans extended by the Indian Railways, Konkan Railway builds in a cost of 7 per cent in its balance sheet though it does not affect its cash flow as it does not pay interest to the Indian Railways, as of now.

At a time when Konkan Railway is on the radar of the Board for Reconstruction of Public Sector Enterprises, this move would give the loss-making public sector unit a shot in the arm.

Konkan Railway has been making operating profits and has been reducing its losses though it is yet to register net profits.

It registered an operating profit of Rs 130.9 crore in 2005-06, Rs 71.8 crore in 2004-05 and Rs 49.8 crore in 2003-04. The net loss for 2005-06 was at Rs 242.5 crore down from a net loss of Rs 305.4 crore (2004-05) and Rs 357.7 crore (2003-04).

The increase in revenues have been driven by income from freight and other projects. Its turnover was at Rs 630 crore for 2005-06, Rs 425 crore (2004-05) and Rs 245.5 crore (2003-04).