FINANCIAL

RESTRUCTURING
PROPOSALS OF
KONKAN RAILWAY
CORPORATION LTD.
1

FORMATION OF KRCL
Formed in 1990-MOR with four states
Maharashtra, Goa, Karnataka and Kerala
Construction of railway line 741km connecting
Roha-Mangalore
First BOT (Build Operate Transfer) project
Commissioned on 26th Jan1998.
2

Rs in Cr.
COST OF THE PROJECT
1989-Estimated cost

MEANS OF FINANCE

867

1998-Completion Cost3555
-Works cost
2520
-Financing cost
1035

Equity Capital
800
-Railways- 51%
-States - 49%(Mah 22%)
(Kar 15%)
(Ker 6%)
(Goa 6%)
Bonds
2755
3

REASONS FOR TIME & COST OVERRUN

Difficult Terrain
Agitations
Change in alignment (Oza Committee)
Inflation and time overrun

UNEVEN PLAYING FIELD

Dr. Manmohan Singh, the then FM,
in parliament -July 1991
I do not think that this corporation can
pay the rate of interest which the term
lending institutions would charge. If you
look at the economic survey asking
this Corporation to go to term
lending institutions is to condemn
this
project
right
from
the
inception to non-viability.
5

UNEVEN PLAYING FIELD contd..

High cost of market borrowings
No concession for new lines.
No strategic line concession in spite of naval
project seabird at Karwar

CAPITAL STRUCTURE AS ON 31-03-2008

Particulars

Amount (Rs in Cr.)

Authorised Capital

806

Paid-up Capital

803

Accmulated losses

3262

Net worth(Paid up Capital Accumulated

losses)
UNSECURED:
MOR loan
-Rs.2731.40Cr.
(Int brg. Rs.1686 Cr Int free Rs. 1045 Cr)

(-) 2459

3222.44

Interest Accrued -Rs. 491.04Cr.

(Provision @ 7% - At par with dividend
payable to General Rev)
SECURED:
Bonds
Total Debt (MOR AND BONDS)

2458.50
5680.95

MANPOWER AS ON 31-03-2008
Executives

- 162

Non Executives - 4142

---------Total

4304 including only 132

---------- deputationists from Indian
Railways.

REASONS FOR SUB-OPTIMAL FINANCIAL

PERFORMANCE
High project cost
High cost of market borrowings
Non-materialisation of freight traffic
High Debt-Equity Ratio

INNOVATIVE MANAGEMENT PRACTICES

AND STRENGTHS
Operating Surplus from first year onwards
Lean-thin, staff strength about 50% of Indian
Railways
Multi-skilling
Innovative and economical maintenance practices
Extensive use of IT
No Government Railway Police
No cashier and all salaries by cheques
All cash collections at stations by banks
Completely computerized Traffic Accounts, hence
staff negligible in Traffic Accounts.
10

MULTI-SKILLING
Medical - A Multi Purpose Health Worker- Ambulance
driver, Dresser, Pharmacist, Clerk, etc.
Mechanical Loco and Carriage Wagon One
Engineering - Works and Permanent Way -One
Electrical Train lighting, air conditioning and
general maintenance - One
S&T -Electrical, Signal & Telecommunication - One

11

PHYSICAL PERFORMANCE

12

FINANCIAL PERFORMANCE

Rs. In Cr.

13

OPTIONS FOR THE FUTURE OF KRCL

1. Closure of Railway line with KRCL.
2. Merger of KRCL with Ministry of Railways.

3. Continuation of KRCL as a PSU.

14

OPTIONS FOR THE FUTURE OF KRCL

contd..
OPTION I:- CLOSURE OF RAILWAY LINE WITH KRCL.

About 25 Mail Express passenger trains including Rajdhani,

Jan Shatabdi etc. carrying about 30 million

passengers

annually.

Freight trains - food grains, fertilizers, cement, iron ore,

petroleum products etc.

Shortest rail link from Mumbai to Kerala

through Maharashtra, Goa and Karnataka.

CLOSURE NOT POSSIBLE - NOT AN OPTION.

15

OPTIONS FOR THE FUTURE OF KRCL

contd..
OPTIONS II AND III:- MERGER WITH MOR
V/S
CONTINUATION OF KRCL AS A PSU.

Merger has no tangible financial & operational benefits.

With or without merger the financial liabilities of MOR

A. i) Bonds worth Rs.2498.50 Cr. .

ii) Interest liability of about Rs.200 Cr. per
year.
B. MOR loan including interest of Rs.2668.40 Cr..

16

OPTIONS FOR THE FUTURE OF KRCL

contd..
With merger additional liabilities and negatives:

In addition, MOR to pay to the four states

Rs.395 Cr. equity at par.
Absorption of about 4000 employees in
MOR/Govt. may not be possible.
Additional requirement 4000 staff as per IR
yardsticks.
KRCL practices appreciated by customers,
MOR, World Bank etc.
17

OPTIONS FOR THE FUTURE OF KRCL

contd..
May not be prudent to destroy an efficiently running system.
Multi-skilling with various modern and innovative work
practices may get sacrificed.
The only Railway PSU, also a Working Railway, a center for
encouraging, conception and development of new ideas to
reality, a cost profit center.
KRCL model is often cited for adoption for new setups like
Dedicated Freight Corridor etc.
Especially with the present day trends towards
corporitisation converting KRCL into a Government
department will be a retrograde step.

18

KRCL ALREADY ON A TURNAROUND

2006-07
Freight
Revenue
higher
passenger revenue for the first time.

Operating Ratio 72.71%.

Zonal Railways with operating ratio above

100% continue to get support.

No. of Zonal Railways with operating ratio

above 100%
Eastern
145.5%, North Eastern 145%,
North Frontier 129%, Southern
114 %.

than

expenditure / revenue

19

IMPORTANT EFFICIENCY INDICES

Description

Unit

Staff
NOS.
strength/track
km.
NTKM/wagon NTKM
day
Wagon
KM
km/wagon
day
Engine
KM
Km/per day

Indian
Railway
2006-07

Konkan
Railway
2007-08

Improvement
%

12.86

4.61

64

2872

4651

62

212

386

82

376

568

51
20

TO SUM UP
Merger neither feasible nor desirable. No
tangible financial & operational benefits
for MOR/Government

MOR has decided on economic, man

power, and productivity considerationsKRCL should continue as a CPSU.
21

ADDITIONAL TRAFFIC & REVENUE STREAMS

Tata Metallics Steel Plant at Sawantawadi
operative 2006-07.
Belekeri Port ex Ankola station operative 2007.
Roll on Roll Off (RO-RO) Ankola-Suratkal
started August, 2007.
Iron ore capacity for Kudremukh Iron from
Bellari-Hospet enhanced 50% from September
2007.
Ispat steel at Roha capacity doubling by may
2008. 3.4 million tonnes to 7 million tonnes.
Dighi port commissioning in next 2 3 years
anticipated 10 million tonnes coal, steel and
22
fertilizers.

ADDITIONAL TRAFFIC & REVENUE STREAMS

contd.

Nagarjuna power-Udipi- 3 million tonnes

coal anticipated commissioning next 2-3
years.
Belekeri port at Ankola- coal imports in
2007-08 anticipated.
Vellarpadam container depot(Cochin)
work started in March 2007. May take 23 years.
Super thermal power plants at Ratnagiri
23
2000 MW, Tadri 4000 MW planned.

ADDITIONAL TRAFFIC & REVENUE STREAMS

contd.

Ms Dempo Ironworks movement ex

Sawanthwadi to Mayem near Goa-3 million
tonnes anticipated next 2-3 years.
In addition, number of minor ports at
Revas near Ratnagiri, Redi etc. being
developed.

24

SUPPORT FROM MINISTRY OF RAILWAYS

MOR has been supporting KRCL by way

of extending loans to service its interest
liabilities and also partially to redeem the
bonds.

25

FINANCIAL RESTRUCTURING PROPOSALS

1. KRCL would continue as a Central PSU
even after discharge of its debt liabilities.

26

FINANCIAL RESTRUCTURING PROPOSALS

contd..
2. MOR loans along with interest accrued thereon
amounting to Rs 2927.74 Cr. will be converted into
non cumulative preferential shares redeemable at the
end of 15 20 years.
Rs. in Cr.
Period
Principal
Interest
Total
Up to 31st
March 07

2552.40

375.34

2927.74

27

FINANCIAL RESTRUCTURING PROPOSALS

contd..
3. MOR will continue to provide financial assistance to
KRCL for full interest servicing and 50% of the
redemption of the Bonds for the next three financial
years, i.e. from 2007-08 to 2009-10. This will also be
converted into non cumulative preferential shares
redeemable after 15 years from the date of payment.
Rs. in Cr.
Redemption Interest
Total
Period
2007 08
2008 09
2009 10

57.00
75.00
130.00

175.30
169.51
160.40

232.30
244.51
290.40

262.00

505.21

767.21

28

FINANCIAL RESTRUCTURING PROPOSALS

contd..

4.The Board of KRCL has also

recommended to review the proposed
arrangement of financial support for
interest and redemption liabilities before
lapse of three years.

PROJECTED FINANCIAL PERFORMANCE

Particulars

2008-09 2009-10 2010-11

Rs. in Cr.
2011-12

Coaching Earnings

215.00

227.00

234.00

250.00

Freight Earnings

324.00

389.00

467.00

500.00

Other Income

20.00

25.00

30.00

35.00

Total Income

559.00

641.00

731.00

785.00

Operating surplus
(PBDIT)

172.00

194.00

217.00

215.00

Finance Charges

180.81

171.70

142.76

127.79

Total Expenditure

648.81

699.70

737.76

778.79

Net Profit/( Loss) (Train

Operations)

(89.81)

(58.70)

(6.76)

6.21

Project Surplus

70.00

85.00

100.00

125.00

Depreciation

81.00

81.00

81.00

81.00

Net Profit/(Loss)

(21.31)

24.55

91.24

128.96

Total Debt

2233.50 1973.50 1910.00

1640.00

Net worth

1023.98 1338.53 1429.77

1558.73

Debt/Equity ratio

0.53

0.44

0.42

0.36

30

BENEFITS OF FINANCIAL RESTRUCTURING

NET-WORTH WILL BECOME POSITIVE

DEBT-EQUITY RATIO WILL IMPROVE

INSTRUMENT FOR TURNAROUND

WILL BE ABLE TO UNDERTAKE MAJOR PROJECTS

31

THANK YOU
32