Financial Daily from THE HINDU group of publications
Tuesday, Nov 16, 2004
Corporate - Courts/Legal Issues
Converting Rs 52-cr dues into equity CIAL, Hudco face-off drags on
Kochi , Nov. 15
COCHIN International Airport Ltd (CIAL) and the Housing and Urban Development Corporation (Hudco), the airport project's major financier, seem to be on a confrontation course following the latter's insistence for converting the Rs 52-crore loan outstanding against the airport company as its equity while the stakeholders of the former are opposing it.
A legal battle appears to be inevitable now, as CIAL had already slapped a legal notice on Hudco after the latter had returned the cheques sent by the former for final settlement of the outstanding dues.
"We have sent cheques for the principal amount of Rs 52 crore and Rs 12 crore towards interest, but Hudco has not accepted it," Mr C.V. Jacob, Chairman of the Sub-committee constituted to work out the modalities for effecting the rights issue involving Rs 52 crore, told Business Line on Monday.
He said that following the non-acceptance of company's repayment CIAL had sent a legal notice to the Hudco saying that it would not be paying any interest on the outstanding loan from the date of return of the cheque. Besides, he said, the company had waited for two years for a decision from the Hudco to convert the Rs 52 crore into its equity. Now, a majority of the shareholders are against allotment of 26 per cent of the equity to Hudco and instead, are in favour of distributing it among the existing stakeholders as rights issue.
Given this situation, the board of directors of CIAL, promoter and operator of the first-ever private international airport in the country at nearby Nedumbassery, had decided in its meeting in September to repay Rs 52 crore to Hudco in final settlement and make available the shares worth this amount for rights issue, he said.
The company had raised Rs 52 crore as loan at 6 per cent interest from a bank for liquidating the outstanding dues of the Hudco, he said.
According to Mr Jacob, the Government and its institutions are already holding 26 per cent of the authorised capital of Rs 200 crore and, hence, no more shares should be issued to the Government institutions. He is of the view that the company's paid-up capital has now been enhanced to Rs 148 crore and the balance 52 crore could be raised through a public issue after a few years at a higher price, as by that time the company would have acquired a strong financial foundation.
Under a one-time settlement CIAL had repaid Rs 120 crore to Hudco out of the total outstanding dues amounting to Rs 172 crore and set aside Rs 52 crore for converting into its equity.
The major stakeholders in the company are the State Government and the state public sector undertakings with 26 per cent and the rest is held by State Bank of Travancore, Federal Bank, BPCL, Air India, NRIs and the public.
When contacted, Hudco sources said that there existed an issue on converting the loan into equity and the corporation would be holding discussions with CIAL authorities soon to sort out the matter.
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