By Group 2: Kumar Pushkar Ankit Saxena Anurag Ranjan Ashutosh Goel Prachi Singhai Anuj Mishra

Flow of the Presentation

Introduction to Konkan Railways Reason for time and cost overrun as well as sub optimal financial performance Innovative Management Practices and details Turnaround on KRCL from 2006-07 onward with special reference to additional traffic and revenue stream Financial Restructuring and present status of KRCL

Introduction
Konkan Railway, the 741-kilometre line connects Maharashtra, Goa, Karnataka and Kerala. The completion of the Konkan Railway was a tryst with destiny for many people in the Konkan region, redeemed in the 50th year of the nations Independence.

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

 First cursory survey was completed upto Mangalore between 1971 and 1973, and an in-depth survey from Dasgaon to Ratnagiri between 1975 and 1977. In 1989, when Mr. George Fernandes became Railway Minister, the dream was pursued with greater vigour. On the first day of his taking over as Railway Minister, he told staff and officers at the Rail Bhavan that he had two projects in mind - Bagaha-Chittauni in Bihar, and Konkan Railway. Dr. Bimal Jalan, then Economic Adviser in the Finance Ministry, suggested the idea of a Corporation with the Centre and beneficiary states taking up the project and raising money.

 By the time the Railway Budget was presented by Mr. George Fernandes in February 1990, the scheme was ready and included in the Budget.
Mr. Sreedharan was earmarked to head the Corporation as Chairman and Managing Director. On July 19, 1990, Konkan railway Corporation Limited (KRCL) was incorporated as a public limited company under the Companies Act, 1956. The entire project length of 760 Km. was divided in seven sectors, each approximately 100 Km. long, headed by a Chief Engineer.

Innovative Management Practices

Multi Skilling
Medical - A Multi Purpose Health Worker- Ambulance driver, Dresser, Pharmacist, Clerk, etc. Mechanical Loco and Carriage Wagon One Electrical Train lighting and air conditioning One staff strength about 50% of Indian Railways

 Extensive use of IT
Using Innovative Information Management System Automating the Station platforms lighting with Train-movements Completely computerized Traffic Accounts, hence staff negligible in Traffic Accounts.

No Government Railway Police All cash collections at stations by banks

REASONS FOR TIME & COST OVERRUN

Difficult Terrain: the uneven terrain of the region between Mumbai to
Manglore, railway lines were not laid for many years Agitations: diverting the planned coastal route to the verdant and ore-rich 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 Karwar

THE GOA CONTROVERSY

KRCL had to deal with court battles in Goa. Aggrieved citizens groups agitated for an alternate rail alignment in 1991. A writ petition was filed by the Goa Foundation in the Panaji Bench of the Mumbai High Court stating that the alignment violated provisions of the Environmental Protection Act 1986. KRCL was victorious in most of this litigation, but work had to be stopped for nine valuable months. The recommendations were implemented in toto, and involved an additional cost of Rs. 28 crore.

CAPITAL STRUCTURE AS ON 31-03-2008

Particulars Authorized Capital Paid-up Capital Amount (Rs in Cr.) 806 803

Accumulated losses
Net worth(Paid up Capital Accumulated losses) 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 to General Rev) SECURED: Bonds Total Debt (MOR AND BONDS)

3262
(-) 2459

3222.44

2458.50 5680.95

REASONS FOR SUB-OPTIMAL FINANCIAL PERFORMANCE

High project cost

High cost of market borrowings

Non- materialisation of freight traffic High Debt-Equity Ratio

Turnaround at KRCL
High interest rate loans were replaced by loans of lower interest rates. (Rates were now almost half!) Loan of about Rs. 2700 Crores from Indian railways was converted into NonCumulative Preference Shares. Freight Traffic picked up significantly as a number of industrial projects related to mining 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 passenger and freight traffic Freight and Passenger revenues have increased 75% over the last 6 years Abolition of safety surcharge has improved the marketability of Konkan railway

Revenue Streams
Regular operations from the railway business Undertaking execution of additional projects from the Indian Railways(Udhampur Srinagar Baramulla Rail Link (USBRL) Project) and other Infra companies (Balaji Infra projects ltd.) Construction of Rail Logistic Networks for industries located along Konkan Railways Income from deposits held and the loans advanced

FINANCIAL RESTRUCTURING PROPOSAL

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

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.

(in Rs. cr.) Period Principal Interest Total

Up to 31st March 07

2552.40

375.34

2927.74

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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. (In Rs. cr.) Period Redemption Interest Total

2007 08 2008 09 2009 10

57.00 75.00 130.00

262.00

175.30 169.51 160.40

505.21

232.30 244.51 290.40

767.21
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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 (in Rs. cr.)

Particulars
Coaching Earnings Freight Earnings Other Income

2008-09
215.00 324.00 20.00

2009-10
227.00 389.00 25.00

2010-11
234.00 467.00 30.00

2011-12
250.00 500.00 35.00

Total Income
Operating surplus (PBDIT)

559.00
172.00

641.00
194.00

731.00
217.00

785.00
215.00

Finance Charges
Total Expenditure Net Profit/( Loss) (Train Operations) Project Surplus Depreciation Net Profit/(Loss) Total Debt Net worth Debt/Equity ratio

180.81
648.81 (89.81) 70.00 81.00 (21.31) 2233.50 1023.98 0.53

171.70
699.70 (58.70) 85.00 81.00 24.55 1973.50 1338.53 0.44

142.76
737.76 (6.76) 100.00 81.00 91.24 1910.00 1429.77
18 0.42

127.79
778.79 6.21 125.00 81.00 128.96 1640.00 1558.73 0.36

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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