Net worth set to fall below 50% of paid-up share capital
CL Jose
KANNUR: It’s about five and a half years since Kannur International Airport Ltd (KIAL) commenced its commercial operations.
With an inevitable loss KIAL is certain to post for the financial year 2023-24 (FY24) (yet to be released), the company’s net worth is set to fall below half its paid-up share capital at Rs1339 crore.
This is viewed as serious and could raise concerns about the company’s financial health and sustainability. The promoters may be required to cough up additional funds to resuscitate the company
As of end-FY23, the net worth has contracted to Rs764.19 crore, which means another Rs95 crore loss could land up the company with a net worth less than half its paid up share capital.
The company still continues to bleed, and more importantly, it now struggles to pay up its loans. It may be interesting to draw a parallel with another airport in the state, Cochin International Airport Ltd (CIAL), where like KIAL, Kerala government is the largest shareholder.
Though five and a half years may not be a long-enough period for an airport project to break even, in the case of KIAL, the pertinent question that stares at the promoters is how far this airport project can sustain itself financially.
While the company has achieved positive operating profit for FY23 and FY22, which stood at Rs30.20 crore and Rs14.05 crore respectively, KIAL reported net losses of Rs126.27 crore in FY2023 against Rs124.30 crore loss for FY2022.
Success story of CIAL
CIAL that commenced its commercial operations in June 1999, started registering profit from its fourth year of operations and interestingly, the company has been distributing dividend to its shareholders right from the fifth year of operations (barring FY21, FY22 due to Covid).
’As per the feedback received from KIAL’s bankers, the company has delayed servicing of obligations of term loans in recent past,” a leading rating agency has noted.
Further, one of the bankers has intimated that the recent delays in debt servicing has prompted the bank to categorise KIAL’s account as special mention account (SMA-0), which means the company has already delayed payment of loans by 30 days.
businessbenchmark.news has recently reported similar issue with Kochi Metro where the company had delayed paying loans in February though the Government had reportedly made arrangements to regularize the debt servicing later..
The rating agency has noted that KIAL’s financial risk profile is weak owing to consistent net losses resulting in erosion of its net worth. The tangible net worth stood at Rs764.19 crore in 2022-23 (FY2023) against Rs891.73 crore in FY2022 and Rs1015.75 crore in FY2021.
Mind you, KIAL’s paid up share capital is Rs1339 crore, which means the net worth of the company has fallen far below its share capital. Sadly enough, there has not been any let up to this trend right from the start.
Acuité rating agency believes the KIAL’s financial risk profile will remain weak over the medium term and timely receipt of funds from the government and other key promoters is critical to meet its funding requirements towards term loan repayment.
Key lenders
The outstanding loan as of end-FY23 is Rs892 crore. While the largest lender to KIAL is Canara Bank with Rs692 crore (as of end-FY23), other lenders are South Indian Bank (SIB) at Rs110 crore and Federal Bank at Rs90 crore.
Major shareholders
The Government of Kerala (GoK) is the largest shareholder in KIAL with 39.26 per cent stake followed by Bharat Petroleum Corporation Ltd (BPCL) at 16.19 per cent, whereas Airports Authority of India (AAI) holds 7.47 per cent and MA Yusufali holds 8.59 per cent shareholding.
