Delay in HUDCO loan servicing leads to Kochi Metro rating downgrade
CL Jose
KOCHI: The subtle yet pervasive financial strain gripping the Kerala Government appears to be gradually affecting the state’s public sector undertakings as well.
It is reliably learnt that in February, Kochi Metro Rail Ltd (KMRL) has delayed the debt servicing of its loans availed from the Housing and Urban Development Corporation Ltd (HUDCO).
HUDCO sanctioned loans to KMRL for preparatory works and land acquisitions for metro projects, while bank loans are for project-related capital expenditure (capex) requirements
“The delay of debt servicing on the part of KMRL was obviously due to the delays in receipt of funds from the Government of Kerala (GoK),” Ind-Ra rating agency explained in an official note.
This has resulted in the downgrading of Kochi Metro’s bank facilities at Rs2079.67 crore to ‘IND BB+’ from ‘IND A-’ with a Stable outlook. IND BB+ rating indicates that the debt instrument has a moderate risk of default.
However, subsequent to the delay in the debt servicing in February, KMRL received a government order on March 18, 2024 to release funds for the servicing of HUDCO loans.
The government that is struggling to make both ends meet has already delayed the payment of salary to the government employees in the past month, being the first time in the recent history.
Despite the political compulsions due to the upcoming elections to the parliament, the government couldn’t clear the dues with regard to the social pension, a touchy realm encompassing more than five million people in the state.
The state government has been in loggerheads with the Centre on the size of borrowing allowed to the state. The government has already moved Supreme Court on this and the case has been referred to the Constitution Bench.
Though KMRL is a project that has the potential to earn revenues, it is yet to report a net profit. Talking to this writer, the chief executive officer (CEO) of KMRL, Loknath Behera had clarified that the arrangement is that the Kerala Government would take care of the servicing of the KMRL debt.
“According to a memorandum of understanding (MoU), the GoK will provide financial support to KMRL for bridging cash losses, if any, and incurring capital expenditure during the operational phase, if required” Ind-Ra has stated.
