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KumAAnAPr

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Flow of the Presentation

Introduction to Konkan Railways Reason for time and cost overrun as well as sub optim

financial performance

Innovative Management Practices and details

Turnaround on KRCL from 2006-07 onward with sreference to additional traffic and revenue stream

Financial Restructuring and present status of KRCL

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Introduction

Konkan Railway, the 741-kilometre line connects MahaGoa, Karnataka and Kerala.

The completion of the Konkan Railway was a tryst withdestiny for many people in the Konkan region, redeem50th year of the nations Independence.

The first train flagged off on the completed track was onJanuary 26, 1998, Republic Day (50th year of the natiIndependence).

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First cursory survey was completed upto Mangalore betw1971 and 1973, and an in-depth survey from Dasgaon

Ratnagiri between 1975 and 1977. In 1989, when Mr. George Fernandes became Railway M

the dream was pursued with greater vigour.

On the first day of his taking over as Railway Minister, hstaff and officers at the Rail Bhavan that he had two prmind - Bagaha-Chittauni in Bihar, and Konkan Railway

Dr. Bimal Jalan, then Economic Adviser in the Finance Msuggested the idea of a Corporation with the Centre andbeneficiary states taking up the project and raising mon

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By the time the Railway Budget was presented by Mr. G

Fernandes in February 1990, the scheme was ready andincluded in the Budget.

Mr. Sreedharan was earmarked to head the CorporationChairman and Managing Director.

On July 19, 1990, Konkan railway Corporation Limitedwas incorporated as a public limited company under theCompanies Act, 1956.

The entire project length of 760 Km. was divided in sevsectors, each approximately 100 Km. long, headed by a Engineer.

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Innovative Management Practices

Multi Skilling Medical - A Multi Purpose Health Worker- Ambulance driver

Dresser, Pharmacist, Clerk, etc.

Mechanical Loco and Carriage Wagon One

ElectricalTrain lighting and air conditioning One

staff strength about 50% of Indian Railways

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Extensive use of IT

Using Innovative Information Management System

Automating the Station platforms lighting with Train-movem

Completely computerized Traffic Accounts, hence staff negligTraffic Accounts.

No Government Railway Police All cash collections at stations by banks

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REASONS FOR TIME & COST OVE

Difficult Terrain: the uneven terrain of the region between Mumba

Manglore, railway lines were not laid for many years

Agitations: diverting the planned coastal route to the verdant and

hinterland taluks of Bicholim and Ponda

Change in alignment Inflation and time overrun

High cost of market borrowings

No concession for new lines.

No strategic line concession in spite of naval project seabird at K

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THE GOA CONTROVERSY

KRCL had to deal with court battles in Goa. Aggrieved citizens groups agitated for an alternate rai

alignment in 1991. A writ petition was filed by the Goa Foundation in the

Bench of the Mumbai High Court stating that the align

violated provisions of the Environmental Protection Act KRCL was victorious in most of this litigation, but workbe stopped for nine valuable months.

The recommendations were implemented in toto, and an additional cost of Rs. 28 crore.

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CAPITAL STRUCTURE AS ON 31-03Particulars Amount (Rs in Cr.

Authorized Capital 80Paid-up Capital 80

Accumulated losses 326

Net worth(Paid up Capital Accumulated losses) (-) 24

UNSECURED:MOR loan -Rs.2731.40Cr.

(Int brg. Rs.1686 Cr Int free Rs. 1045 Cr)Interest Accrued -Rs. 491.04Cr.(Provision @ 7% - At par with dividend payable toGeneral Rev)

3222

SECURED:Bonds 2458

Total Debt (MOR AND BONDS) 5680

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REASONS FOR SUB-OPTIMALFINANCIAL PERFORMANCE

High project cost

High cost of market borrowings

Non- materialisation of freight traffic

High Debt-Equity Ratio

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Turnaround at KRCLHigh interest rate loans were replaced by loans of lower interest rates. now almost half!)

Loan of about Rs. 2700 Crores from Indian railways was converted intoCumulative Preference Shares.

Freight Traffic picked up significantly as a number of industrial projectsmining and manufacturing came up along the Konkan railway

Pick up in the RORO(Roll on Roll Off) service along with freight

Commissioning of new lines has also helped in the pickup in the passengfreight traffic

Freight and Passenger revenues have increased 75% over the last 6 year

Abolition of safety surcharge has improved the marketability of Konkan

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Revenue Streams

Regular operations from the railway business

Undertaking execution of additional projects from the IndianRailways(Udhampur Srinagar Baramulla Rail Link (USBRL) Project) andInfra companies (Balaji Infra projects ltd.)

Construction of Rail Logistic Networks for industries located along KonRailways

Income from deposits held and the loans advanced

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FINANCIAL RESTRUCTURING PROPO

KRCL would continue as a Central PSU even after disof its debt liabilities.

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FINANCIAL RESTRUCTURING PROPOSALScontd..

2. MOR loans along with interest accrued thereon amoun2927.74 Cr. will be converted into non cumulative preferenredeemable at the end of 15 20 years.

Period Principal Interest T

Up to 31st March

07

2552.40 375.34 2

15

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FINANCIAL RESTRUCTURING PROPOSALScontd..

3. MOR will continue to provide financial assistance to KRCL forservicing and 50% of the redemption of the Bonds for thefinancial years, i.e. from 2007-08 to 2009-10. This will also

into non cumulative preferential shares redeemable after 15 yedate of payment.

(In R

Period Redemption Interest T

2007

08200809

200910

57.0075.00

130.00

175.30169.51

160.40

2324

29

262.00 505.21 76

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FINANCIAL RESTRUCTURING PROPOSALScontd..

4.The Board of KRCL has also recommended to revproposed arrangement of financial support for interedemption liabilities before lapse of three years.

PROJECTED FINANCIAL PERFORMANCE

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(in R

Particulars 2008-09 2009-10 2010-11

Coaching Earnings 215.00 227.00 234.00

Freight Earnings 324.00 389.00 467.00

Other Income 20.00 25.00 30.00

Total Income 559.00 641.00 731.00

Operating surplus (PBDIT) 172.00 194.00 217.00

Finance Charges 180.81 171.70 142.76

Total Expenditure 648.81 699.70 737.76

Net Profit/( Loss) (Train Operations) (89.81) (58.70) (6.76)

Project Surplus 70.00 85.00 100.00

Depreciation 81.00 81.00 81.00

Net Profit/(Loss) (21.31) 24.55 91.24

Total Debt 2233.50 1973.50 1910.00

Net worth 1023.98 1338.53 1429.77

Debt/Equity ratio 0.53 0.44 0.42 18

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BENEFITS OF FINANCIAL RESTRUCTURING

NET-WORTH WILL BECOME POSITIVE

DEBT-EQUITY RATIO WILL IMPROVE

INSTRUMENT FOR TURNAROUND

WILL BE ABLE TO UNDERTAKE MAJOR PROJECTS

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THANK YOU

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