Rail Analysis India Dec Edition 2017 Digital Magazine | Page 54
Article | 53
54 | Article
market at viable rate of interest, obtaining better credit
rating from rating agency, qualify for bidding for new
contracts and to take up various sanctioned projects on
Konkan Railway route etc
Cabinet approves second financial
restructuring of Konkan Railway
Corporation Ltd.
T
he Cabinet Committee on Economic
Affairs chaired by the Prime Minister
Shri Narendra Modi has approved the
Second Financial Restructuring proposal
of Konkan Railway Corporation Limited
(KRCL), a CPSE under the administrative
control of the Ministry of Railways (MoR).
The conversion of Non-Cumulative Redeemable
Preference Shares (RPS), amounting to Rs.
4,079.51 crore, held by President of India
through Ministry of Railways, into Compulsorily
Convertible
Non-Cumulative
Preference
Shares (CCPS), has been approved. This will
shore up the net worth of the Company after
implementation of the new accounting standard
IND AS.
A negative net worth of KRCL will result in:
KRCL will not be categorized as a Sick Company as per
DPE guidelines. • Poor credit rating of KRCL.
Background: • Difficulty in raising funds from market by KRCL,
As per notification from Ministry of Corporate Affairs
(MCA) from the financial year 2016-17 onward,
companies having net worth of Rs.500 crore or above as
on 31st March, 2014, will have to adopt IND-AS (Indian
Accounting Standards i.e. new Accounting Standards
introduced on the basis of IFRS) in the preparation
and compilation of Accounts. As per IND AS, the Non-
Cumulative Redeemable Preference Shares are treated
as "Compounded Financial Instruments" and disclosed
in two components - other equity and financial liability.
The liability component is equal to the present value
of the redemption amount on the date of the issue,
considering the discount rate at the date of the issue of
the preference shares. The other equity represents the
component equal to the total redeemable amount of the
preference shares less liability component.
Thus, a part, of Non-Cumulative Redeemable Preference
Share issued to President of India (through MoR) • Difficulty in bidding for new contracts by KRCL and
• KRCL will be categorised as 'sick company' as per
DPE guidelines.
Implementation Strategy and
targets:
KRCL will have to present the previous year's
Balance Sheet figures restated as per IND-AS,
as on 31st March 2016 and those at the opening
of the business i.e., as on 1st April 2015. The
conversion of the Non-cumulative Redeemable
Preference Shares (RPS) into Compulsorily
Convertible non-cumulative Preference Shares
(CCPS) w.e.f. 31st March 2015 will make KRCL's
net worth positive.
Major Impact:
Net worth of KRCL will remain positive.
A positive Net Worth for the KRCL is a sine qua
non for the purpose of raising funds from the
by KRCL will have to be shown as 'Outside Liability'1
instead of 'Equity Capital' in the Balance Sheet of KRCL
and the Net Worth of KRCL will turn negative.
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