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<ul><li><p>FINANCIAL RESTRUCTURING PROPOSALS OF KONKAN RAILWAY CORPORATION LTD.*</p></li><li><p>FORMATION OF KRCLFormed in 1990-MOR with four statesMaharashtra, Goa, Karnataka and KeralaConstruction of railway line 741km connecting Roha-MangaloreFirst BOT (Build Operate Transfer) projectCommissioned on 26th Jan1998.*</p></li><li><p> Rs in Cr.*</p><p>COST OF THE PROJECTMEANS OF FINANCE 1989-Estimated cost 8671998-Completion Cost3555-Works cost 2520-Financing cost 1035Equity Capital 800 -Railways- 51% -States - 49%(Mah 22%) (Kar 15%) (Ker 6%) (Goa 6%) Bonds 2755 </p></li><li><p>REASONS FOR TIME &amp; COST OVERRUNDifficult Terrain AgitationsChange in alignment (Oza Committee)Inflation and time overrun </p><p>*</p></li><li><p>Dr. Manmohan Singh, the then FM, in parliament -July 1991I 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.UNEVEN PLAYING FIELD *</p></li><li><p>UNEVEN PLAYING FIELD contd.. High cost of market borrowingsNo concession for new lines.No strategic line concession in spite of naval project seabird at Karwar</p><p>*</p></li><li><p>CAPITAL STRUCTURE AS ON 31-03-2008*</p><p>ParticularsAmount (Rs in Cr.) Authorised Capital806Paid-up Capital803Accmulated losses3262Net worth(Paid up Capital Accumulated losses)(-) 2459UNSECURED: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 to General Rev)</p><p>3222.44</p><p>SECURED:Bonds2458.50Total Debt (MOR AND BONDS)5680.95</p></li><li><p>MANPOWER AS ON 31-03-2008Executives - 162Non Executives - 4142 ---------- Total 4304 including only 132 ---------- deputationists from Indian Railways.</p><p>*</p></li><li><p>REASONS FOR SUB-OPTIMAL FINANCIAL PERFORMANCE High project costHigh cost of market borrowingsNon-materialisation of freight trafficHigh Debt-Equity Ratio</p><p>*</p></li><li><p>INNOVATIVE MANAGEMENT PRACTICES AND STRENGTHSOperating Surplus from first year onwardsLean-thin, staff strength about 50% of Indian RailwaysMulti-skilling Innovative and economical maintenance practicesExtensive use of ITNo Government Railway Police No cashier and all salaries by chequesAll cash collections at stations by banks Completely computerized Traffic Accounts, hence staff negligible in Traffic Accounts.</p><p>*</p></li><li><p>MULTI-SKILLING Medical - A Multi Purpose Health Worker- Ambulance driver, Dresser, Pharmacist, Clerk, etc. Mechanical Loco and Carriage Wagon OneEngineering - Works and Permanent Way -OneElectrical Train lighting, air conditioning and general maintenance - OneS&amp;T -Electrical, Signal &amp; Telecommunication - One</p><p>*</p></li><li><p>PHYSICAL PERFORMANCE *</p><p>Particulars</p><p>Unit</p><p>2002-03 </p><p>2003-04 </p><p>2004-05 </p><p>2005-06 </p><p>2006-07 </p><p>2007-08</p><p>Originating loading </p><p>Million Ton</p><p>0.57</p><p>0.62</p><p>0.68</p><p>0.68</p><p>1.06</p><p>1.21</p><p>NTKM</p><p>Million</p><p>525</p><p>672</p><p>1314</p><p>1597</p><p>2090</p><p>2854.21</p><p>GTKM</p><p>Million</p><p>4909</p><p>5144</p><p>6489</p><p>7147</p><p>8204</p><p>9350.30</p><p>GMT</p><p>Million Ton</p><p>6.64</p><p>7.00</p><p>8.78</p><p>9.67</p><p>11.10</p><p>12.66</p></li><li><p>FINANCIAL PERFORMANCE Rs. In Cr. *</p><p>Particulars</p><p>2002-03</p><p>2003-04</p><p>2004-05</p><p>2005-06</p><p>2006-07 </p><p>2007-08</p><p>Coaching Earnings</p><p>175.49</p><p>186.37</p><p>184.08</p><p>191.36</p><p>205.66</p><p>231.95</p><p>Freight Earnings</p><p>36.52</p><p>48.99</p><p>87.68</p><p>149.36</p><p>206.58</p><p>269.07</p><p>Other Income </p><p>15.42</p><p>12.84</p><p>7.80</p><p>8.75</p><p>11.68</p><p>9.44</p><p>Total Earnings</p><p>227.43</p><p>248.20</p><p>279.56</p><p>349.47</p><p>423.92</p><p>510.46</p><p>Operating surplus (PBDIT)</p><p>81.64</p><p>54.63</p><p>62.89</p><p>108.14</p><p>139.72</p><p>209.37</p><p>Finance Charges - On Bonds</p><p>269.17</p><p>256.60 </p><p>222.46 </p><p>210.96 </p><p>215.20 </p><p>185.47</p><p> - On MoR Loans </p><p>34.77 </p><p>75.21 </p><p>80.64 </p><p>90.42 </p><p>104.45 </p><p>118.19</p><p>Total Finance Charges </p><p>303.94 </p><p>331.81 </p><p>303.10 </p><p>301.38 </p><p>319.65 </p><p>303.66</p><p>Depreciation</p><p>70.34</p><p>70.44</p><p>69.81</p><p>69.74</p><p>69.90</p><p>70.05</p><p>Total Expenditure </p><p>550.55 </p><p>607.56 </p><p>592.97 </p><p>614.77 </p><p>675.83 </p><p>676.91</p><p>Net Profit/(Loss )</p><p> (Train Operations) </p><p>323.12 </p><p>359.36 </p><p>313.41 </p><p>258.40 </p><p>252.12 </p><p>(168.86)</p><p>Project Surplus </p><p>0.13 </p><p>1.63 </p><p>8.96 </p><p>22.79 </p><p>18.84 </p><p>23.07</p><p>Total net loss </p><p>(322.99) </p><p>(357.73) </p><p>(304.45) </p><p>(242.51) </p><p>(233.07) </p><p>143.38</p><p>Net worth (negative)</p><p>(1211)</p><p>(1558)</p><p>(1859)</p><p>(2080)</p><p>(2314)</p><p>(2459)</p><p>Debt/ Equity ratio</p><p>5.54</p><p>5.92</p><p>6.38</p><p>6.54</p><p>6.76</p><p>7.07</p><p>Operating Ratio </p><p>95.00 </p><p>106.40 </p><p>102.50 </p><p>89.00 </p><p>83.40 </p><p>72.71</p></li><li><p>Closure of Railway line with KRCL.Merger of KRCL with Ministry of Railways.3. Continuation of KRCL as a PSU.</p><p>OPTIONS FOR THE FUTURE OF KRCL</p><p>*</p></li><li><p>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.</p><p>OPTIONS FOR THE FUTURE OF KRCL contd..*</p></li><li><p>OPTIONS FOR THE FUTURE OF KRCL contd..</p><p>OPTIONS II AND III:- MERGER WITH MOR V/S CONTINUATION OF KRCL AS A PSU.</p><p>Merger has no tangible financial &amp; 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..*</p></li><li><p>OPTIONS FOR THE FUTURE OF KRCL contd..With merger additional liabilities and negatives:</p><p>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. </p><p>*</p></li><li><p>OPTIONS FOR THE FUTURE OF KRCL contd..May not be prudent to destroy an efficiently running system.</p><p>Multi-skilling with various modern and innovative work practices may get sacrificed.</p><p>The only Railway PSU, also a Working Railway, a center for encouraging, conception and development of new ideas to reality, a cost profit center.</p><p>KRCL model is often cited for adoption for new setups like Dedicated Freight Corridor etc.</p><p>Especially with the present day trends towards corporitisation converting KRCL into a Government department will be a retrograde step.*</p></li><li><p>KRCL ALREADY ON A TURNAROUND2006-07 Freight Revenue higher than passenger revenue for the first time.</p><p>Operating Ratio - expenditure / revenue 72.71%.</p><p>Zonal Railways with operating ratio above 100% continue to get support. </p><p>No. of Zonal Railways with operating ratio above 100%Eastern 145.5%, North Eastern 145%, North Frontier 129%, Southern 114 %. *</p></li><li><p>IMPORTANT EFFICIENCY INDICES*</p><p>DescriptionUnitIndian Railway2006-07Konkan Railway2007-08Improvement %Staff strength/track km.NOS.12.864.6164NTKM/wagon dayNTKM2872465162Wagon km/wagon dayKM21238682Engine Km/per dayKM37656851</p></li><li><p>TO SUM UPMerger neither feasible nor desirable. No tangible financial &amp; operational benefits for MOR/Government MOR has decided on economic, man power, and productivity considerations- KRCL should continue as a CPSU.*</p></li><li><p>ADDITIONAL TRAFFIC &amp; REVENUE STREAMSTata 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 fertilizers.</p><p>*</p></li><li><p>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 2-3 years.Super thermal power plants at Ratnagiri 2000 MW, Tadri 4000 MW planned.</p><p>ADDITIONAL TRAFFIC &amp; REVENUE STREAMS contd.*</p></li><li><p>Ms Dempo Ironworks movement ex Sawanthwadi to Mayem near Goa-3 million tonnes anticipated next 2-3 years.</p><p>In addition, number of minor ports at Revas near Ratnagiri, Redi etc. being developed.ADDITIONAL TRAFFIC &amp; REVENUE STREAMScontd.*</p></li><li><p>SUPPORT FROM MINISTRY OF RAILWAYS </p><p>MOR has been supporting KRCL by way of extending loans to service its interest liabilities and also partially to redeem the bonds. </p><p>*</p></li><li><p>FINANCIAL RESTRUCTURING PROPOSALS 1. KRCL would continue as a Central PSU even after discharge of its debt liabilities. </p><p>*</p></li><li><p>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.</p><p>*</p><p>PeriodPrincipal Interest Total Up to 31st March 07 2552.40 375.34 2927.74 </p></li><li><p>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.</p><p>*</p><p>PeriodRedemptionInterest Total </p><p>2007 08 2008 09 2009 1057.0075.00130.00175.30169.51160.40232.30244.51 290.40 262.00 505.21 767.21 </p></li><li><p>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.</p></li><li><p>PROJECTED FINANCIAL PERFORMANCE Rs. in Cr.*</p><p>Particulars2008-09 2009-10 2010-112011-12 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 Depreciation81.0081.0081.0081.00Net Profit/(Loss) (21.31) 24.55 91.24 128.96 Total Debt2233.501973.501910.001640.00Net worth1023.981338.531429.771558.73Debt/Equity ratio0.530.440.420.36</p></li><li><p>BENEFITS OF FINANCIAL RESTRUCTURING</p><p>NET-WORTH WILL BECOME POSITIVE</p><p>DEBT-EQUITY RATIO WILL IMPROVE</p><p>INSTRUMENT FOR TURNAROUND</p><p>WILL BE ABLE TO UNDERTAKE MAJOR PROJECTS*</p></li><li><p>THANK YOU*</p><p>*</p></li></ul>