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G.K. Nair

KOCHI, Nov. 28

A DECISION on Hudco's participation in the equity of the Cochin International Airport Ltd (CIAL) is expected, probably next week.

The Hudco authorities had responded favourably to the proposals made by the CIAL delegation led by the State Finance Minister, Mr K. Sankaranayanan, at a meeting held on November 26 in New Delhi, Mr Babu C. Rajeev, Managing Director, CIAL, told Business Line on Monday. He said that the airport company had, apart from soliciting Hudco's participation in the equity, demanded reduction in the interest rates of the existing loans and waiving of penal interest on it. The Hudco board was scheduled to meet next week where a positive decision was expected, he said.

"However, Hudco being a Central Government institution, clearance of the relevant Ministry is needed and it is expected to materialise soon, as Mr O. Rajagopal, Minister of State for Urban Development, has been showing keen interest in this issue," he pointed out. A decision on the CIAL proposals would emerge in 10 days time, he said. "We had been preparing the ground for the past one month to arrive at a mutually acceptable solution."

The Airports Authority of India (AAI) has already promised to take 26 per cent of the total expanded capital base of Rs 200 crore. And yet, "there is enough equity space for Hudco," he said. The State Government's stake in the company is 26 per cent while 5 major participants in CIAL have started investing to raise their stake also to 26 per cent.

With the funds raised from rights issue, the company had already liquidated the loans of Federal Bank and the Ernakulam district Co-operative Bank while it had substantially reduced the loan liability with the SBT, he said. Hudco could convert part of its loan to equity and reschedule the rest at a lower rate of interest.

The company, as part of its efforts to get rid of the high cost loans, had decided to expand its capital base from Rs 90 crore to Rs 200 crore about two years ago through rights issue and by marketing shares to interested parties.

The current major loan liability of around Rs 130 crore is of Hudco, the major financier of the Rs 230 crore airport project.

If Hudco agreed to covert part of the loan as equity and rescheduled the rest at a lower rate of interest, the airport would be able to post net profit from the next fiscal.

The debt servicing is eating into the annual revenue of the company, as the term loan was given at 17 per cent interest. CIAL had earlier also sought a reduction in interest rate to 12 per cent. Hudco had agreed long ago to waive the penal interest if the company paid all the interest dues by March 31, 2000.

Given this positive development, the company would be able to complete its equity expansion by mid-December besides bringing down the debt equity ratio substantially to acceptable levels.

On the other hand, the Emirates Airlines would commence its operations to and from Nedumbassery from December 2 and this would be followed by direct flights to New Jersey and Chicago by Air India. Besides, Qatar Airways and Air Lanka are also expected to operate from here.

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