The Housing and Urban Development Corporation (Hudco) has sought government clearance for capitalising a portion of its advances to Cochin International Airport Ltd (CIAL), the company building the country's first private airport.
Sources said CIAL had sought conversion of about 10 per cent of outstanding loans into equity but Hudco is yet to decide the quantum. They said although Hudco's articles of association permit funding of projects through the equity route, prior government approval was necessary for such investment.
At present, Hudco does not hold stakes in any infrastructure project. The move to pick up stake in CIAL will pave the way for similar support to other projects, including urban infrastructure projects where Hudco has the largest exposure.
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Hudco is eager to pick up equity in a number of infrastructure project in an attempt to diversify and maximise its revenue stream. Its current revenue flow is in the form of interest payments.
Hudco has provided debt support to the extent of Rs 140 crore to the airport project. The second tranche of Rs 40 crore was approved last month. All the loans have a tenor of 10 years, with a moratorium on principal payments during the construction phase. The interest rate on loans is 17 per cent.
The total cost of the project is estimated at Rs 460 crore, which includes capitalisation of interest during the construction period. Sources said the proposed capitalisation of the loan was part of an outstanding interest payment due from the project.
The project is expected to be commissioned by the middle of next year when principal payments are expected to begin. Capitalisation of part of the interest payment due to Hudco is expected to stop when the airport begins to generate cash flows in 1999. From 1999, debt service payments are expected to come entirely from the project revenue.