Konkan Railway bonds get CRISIL ''AAA(so)'' rating

Rs 0.75 billion Taxable Bond Programme AAA(so)/Stable
Rs 1.35 billion Tax Free Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 5.88 billion Taxable Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 0.50 billion Taxable Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 8.18 billion Taxable Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 1.14 billion Tax Free Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 1.39 billion Taxable Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 2.00 billion Tax Free Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 2.29 billion Tax Free Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 1.00 billion Tax Free Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 1.765 billion Tax Free Bond Programme AAA(so)/Stable (Reaffirmed)
Rs 577.1 million Taxable Bond Programme AAA(so)/Stable (Reaffirmed)

CRISIL has assigned a provisional rating of 'AAA (so) / Stable' to Konkan Railway Corporation Ltd's (Konkan Railway Corporation) Rs 0.75 billion taxable bond programme, while reaffirming the ratings on the existing bond issues. The provisional rating will become valid once all the required documentation related to the trustee-administered payment structure is submitted to CRISIL.

The rating on the new bond issue is based on a letter of comfort from the government of India (GoI) through the Ministry of Railways (MoR). As in the case of the existing bond issues, a trustee-monitored payment mechanism will be put in place to ensure the timely payment of the interest and principal obligations on the proposed bond programme. The trustee will ensure that the GoI services the debt obligations on time, if the Konkan Railway Corporation does not have sufficient funds to do so.

CRISIL believes that the Konkan Railway Corporation's revenues will not be adequate to meet its debt-servicing obligations in the medium term. Since the ratings are based on letters of comfort and guarantees from the GoI, the ratings reflect the MoR and GoI's ability to service these obligations. The ratings also derive strength from the satisfactory functioning of the payment mechanism instituted for the existing bonds as illustrated by the timely disbursement of funds by the MoR for further distribution to bondholders. The unsecured loans provided by the MoR under this arrangement and the interest thereon will continue to be subordinated to the existing bondholders' obligations.

A GoI undertaking, the Konkan Railway Corporation was incorporated in July 1990 to build, operate and transfer (BOT) a 760-km single track, broad gauge, non-electrified railway line between Roha in Maharashtra and Mangalore in Karnataka. Through the MoR, the GoI holds a 51 per cent stake in the company while the governments of the four beneficiary states, Maharashtra, Karnataka, Goa and Kerala, hold the remaining stake. The project was commissioned in January 1998 and was funded with an equity contribution of Rs 80 million and debt of Rs 280 million.

Outlook: CRISIL believes that the letters of comfort/guarantee provided by the MoR ensure a significant binding obligation on the GoI to provide timely support to the company in the event of any exigencies.