HASSAN MANGALORE RAIL DEVELOPMENT COMPANY LIMITED

1. HASSAN MANGALORE RAIL DEVELOPMENT COMPANY LIMITED

2. Board of Directors • Mr. V. Madhu IAS Principal Secretary to GoK – IDD Chairman • Mr. V. P. Baligar IAS Principal Secretary to GoK – Director Commerce & Industries • Mr. G. Baderiya IAS Special Secretary to GoK – IDD Director & CEO • Mr. N. K. Shukla IRTS Executive Director Director Perspective Planning Railway Board • Mr. N. C. Sinha IRTS Chief Operations Manager, S W Rly Director • Mr. B. B. Verma IRAS Divisional Rly Manager, Mysore Director • Mr. A. B. Shenoy CFO & Company Secretary, Director Infrastructure Deve Karnataka, Ltd . • Mr. Ashwin Paul Head Commercial, MEL Director • Mr. Tamilvanan Chairman, New Mangalore Port Director 1

3. The Beginning Hassan Mangalore Rail Development Company Limited was incorporated in July 2003 under the Companies Act of 1956 as a joint venture of the Government of Karnataka & the Ministry of Railways. Objective: HMRDC to take over the gauge conversion of the Hassan Mangalore railway line and ensure its early completion through appropriate and timely funding. The company was to raise the required resources through debt and equity. 2

4. Project Implementation • The gauge conversion of the line has been completed under a set of agreements signed by the Company with the Ministry of Railways and the South Western Railway. • Concession Agreement • Construction Agreement • Operations and Maintenance Agreement • The line was commissioned for goods traffic on 5th May 2006 and for passenger services on 8th December 2007. Company is enjoying Tax Holiday for 10 years from COD & Company is paying MAT at 15% as against 33% IT. Company’s Credit rating is LA (Adequate credit quality) given by ICRA 3

5. Framework of operation of SPV • Key features of the framework are: • Cost of construction financed by HMRDC • Line capacity to be used primarily for goods services • Assured passenger services to the extent operated on the meter gauge. • Running and operating costs of passenger services to be borne by Indian Railways • Cost of freight operations and maintenance of the line to be met by HMRDC. • Revenues to Company to accrue from freight only • Revenues from passenger trains to accrue to IR 4

6. Concession Agreement Under theConcession Agreement, the Ministry of Railways has granted HMRDC a concession for 32 years during which the company would convert the MG line between Hassan and Mangalore into a BG line and thereafter undertake its operation and maintenance during the concession period.  To enable construction of the new line, the existing assets including land, station buildings, formation, bridges etc. (assets forming part of the rail network and necessary for gauge conversion) have been leased to the company. 5

7. O & M Agreement Under theOperations and Maintenance Agreement HMRDC has contracted with SWR for operation of goods train services on the line and its maintenance till the termination of the concession period. Construction Agreement Under theConstruction Agreement signed between HMRDC and South Western Railway (SWR) the later has been appointed as the Engineering, Procurement and Construction (EPC) Agency for the line and entrusted with the construction work.  6

8. Project Financing Initial Project Cost Rs. 293 cr Construction Cost Rs. 275 cr RMV Equipment Rs. 4 cr Pre-operative exp & IDC Rs. 14 cr Funding through Subordinate debt from IR Rs. 141 cr Equity Rs. 112 cr Term loans from banks Rs. 90 cr 7

9. Construction of the line • Detailed estimate sanctioned by Rly Board in Dec 2002 forms the basis of the construction agreement. • The 183 Km long MG line from Hassan to Kankanadi (both stations excluded) has been converted to BG. • Four new crossing stations were planned of which three have been commissioned so far. Arebetta station is yet to be opened. • The cost of construction as per the Construction Agreement is Rs 274.71 Cr. In addition, HMRDC has also paid for rail mounted vehicles to be used for inspection & maintenance of the line. • The completion cost of the project is presently being worked out. It is expected to be around Rs. 340 cr. 8

10. Operations & Maintenance of the line The Operations and Maintenance of the line from Commercial Operations Date (COD) i.e. 5thMay 2006 is being done by SWR under the terms of the O & M agreement. Freight due to HMRDC from traffic carried on the line is calculated as per the inter-railway rules of apportionment. O & M ( Fixed & Variable) costs payable by HMRDC are calculated on the basis of the formula prescribed in the O & M agreement. Fixed costs covering cost of manpower, cost of consumables etc. are payable irrespective of the traffic moved. Variable costs including fuel, cost of crew, loco and wagon usage etc. vary according to the tonnage carried on the line. Apportioned freight minus the O&M costs constitutes HMRDC’s share of revenue. 9

11. Traffic Forecast The Hassan Mangalore line is expected to carry up to six million tonnes of freight per annum that includes Towards Mangalore Area: Export iron ore to Port from Chitradurga – Tumkur and Hospet –Bellary sectors Iron ore for KIOCL pellet plant at Mangalore Cement, foodgrain and other general goods to Mangalore goods shed From Mangalore Area: Coal Fertilizer imports Limestone, Iron Ore Pellet Fertilizer from MCF, Mangalore. POL and LPG from Mangalore Refinery, Thokur. 10

12. Capital Structure • Authorized share capital Rs. 125 Cr.(Equity share of Rs.10/- each) • Paid up capital Rs. 112 Cr. • The shareholding pattern is as follows • Government of Karnataka Rs.28 Cr • Mysore Sales International Ltd. Rs. 7 Cr 40% • Vishveshwarya Trade Center Rs. 10 Cr     • Ministry of Railways Rs. 45 Cr 40% • New Mangalore Port Trust Rs. 10 Cr 9% • Mineral Enterprises Limited Rs. 10 Cr 9% • K-RIDE Rs. 2 Cr 2% 11

13. Sl.No. Section Elevation (MSL) Distance Gradient 1 Hassan – 900m 42 kms. 1 in 100 plateau 2 Sakleshpur – 967m 3 Sakleshpur– 967m 55 kms. 1 in 50 Ghat 4 Subramanya Rd. – 113m 5 Subramanya Rd.– 113m 86 kms. 1 in 100 plain 6 Mangalore – 9.5m Salient Physical Features of Hassan - Mangalore Section 1. Physical features 1. Physical features 12

14. Hassan to Mangalore – 183 Kms Main line track class I - 52 Kg rails Loop line class II - 52 Kg rails Hassan to Sakleshpur 60 Kg PSC sleepers - M+ 4 density Sakleshpur to Mangalore 60 Kg PSC sleepers - M+ 7 density Loop lines 52 Kg PSC sleepers - M+ 4 density 2. Track A. Rails B. Sleepers C. Fittings Class - I fittings - ERC Clips, GR pads, metal liners in mid section and GFN liners in yards D. Ballast - 250 mm cushion. 13

15. 3. Bridges - Total - 670Major Bridges – 91 Minor Bridges – 549 Road over bridges – 16 Road under bridges – 12 FOB –2 4. Tunnels - Total Nos. 57 Total length - 10.98 kms. Longest tunnel - 578 mts No.11 5. Level Crossings - Total - 65 Manned– 31 Unmanned - 34 8. Slip Sidings Donigal, Yedakumeri, Shrivagulu 6. Curves - Total – 110 80 - 85 Nos.- 30 to 50 - 25 Nos 7. Catch Sidings Donigal station – Shrivagilu 14

16. Details of Block Stations and Halts in Hassan-Mangalore

17. Line Capacity • The Maximum number of Trains that can be operated in a Day in a section is known as Line Capacity, which isdecided by the running time of the Critical Block Section by a slowest moving train. • The Critical Block Section of HMRDC Line is DOGL-SVGL in the ghat section of SKLR-SBHR section, 95 minutes is the running time of the critical block section and line capacity is 15 trains per day including Passenger Trains. • Some amount of time to be provided for the track and signal maintenance works, which again reduces the Line Capacity to that extent which is equivalent to 3 Hrs/ 2 trains. • To increase the line capacity the running time of critical block section has to be reduced for which the provision of CATCH Sidings (safety device) to be under taken at all the stations on the ghat section. • To improve the line capacity maximum permissible speed to be increased to 45 KMPH in the UP direction without compromising the safety since the track strength has been upgraded over the period. 16

18. Operational & Financial Performance Rs. - Crores

19. Commodity wise Earnings Rs. - Crores

20. Commodity wise Earnings/Train Load2009-10

21. Fuel consumption and costs for Commodities - 2009-10 Cost for Fuel – Rs. 39.10 per lit * SFC – Fuel consumption for 1000 GTKM

22. Components of Fixed & Variable Costs 21

23. Review of O&M Costs

24. Rs. - Crores Income and Expenditure

25. Earnings 24

26. Performance of the Company Rs. - Crores

27. 26

28. Fixed Assets Rs - Crores GAV – Gross Asset Value NAV – Net Asset Value

29. Capital Structure Rs. - Crores

30. Section Staff Position in HMRDC 29

31. Works carried out by Mysore Division & CAO/CN/BNC Rs. -Crores

32. This ‘Terms of Reference’ (TOR) outlines the objectives, methodology and costs associated with Operational Improvements Assessment (OIA).Objectives :a) To document the market potential (both medium term & long term) of traffic. B) To conduct a SWOT Analysis and suggest ways and means of retention/enhancement of existing traffic with specific stress on capturing road traffic.C) The likely impact of the future projects proposed by GoK such as Hubli-Ankola New Broad Gauge line, Talaguppa-Honnavar Broad Gauge line, Hospet-Vasco doubling being executed by RVNL to be quantified on realistic terms.D) To suggest ways to overcome short term constraints faced by clients like shortage of Box-N wagons and locos so as to approach Railway Board for redressal of grievances.E) To explore ways for reducing running time in the critical section like increasing permissible speed, augmentation of line capacity with financial implications. F)To achieve profit optimization.G) To identity appropriate measures to avoid, remedy or mitigate, where practical, any adverse effects of the proposed activity on environmental/cultural values.H) To review Railway Board’s policy on R3i and suggest for improvements.I) To evaluate the need based requirement of conducting a techno economic feasibility through a Professional Agency like RITES for Doubling of Line. The Second Line will be an independent line requiring environmental & MOEF clearance.

33. Pending Issues with Railways 32

34. PROJECT LENGTH COVERED : 97 Kms out of 183 Kms from (SKLR to KBPR) ASSETS INSURED : Permanent way, Station Buildings, Signaling, and Telecom, Mechanical & Electrical Equipments RISKS COVERED : Force Majeure occurrence such as fire, root, flood, breaches, lightning, earthquake and other natural disaster – mainly on account of landslides/ rockslides during monsoon. LOSSES COVERED : I) Restoration cost of tracks and assets damaged ii) Loss of Profit/ Revenue on account of stoppage of operation on account of Force majeure events. POLICY PERIOD : 4th January 2010 to 3rd January 2011 PREMIUM PAID : 2008 Rs. 33.60 Lakhs 2009 Rs. 40.08 Lakhs 2010 Rs. 69.53 Lakhs CLAIMS SETTELED : 2008 : Restoration Cost : Rs. 61 Lakhs Loss of Profit : Rs. 1.83 Crores (Under Process) 2009 : Restoration Cost : Rs. 97 Lakhs Loss of profit : Rs. 4.33 Crores Under Process INSURANCE 33

35. Income Tax Holiday and Payment of MAT • INCOME TAX HOLIDAY : Nature of exemption : Eligibility U/s 80IA being Infrastructure facility Quantum of Exemption : 100% of Profit/ Income of the Company Period of Exemption : For 10 Consecutive years from the Initial year Exemption Availed : From FY 2007-08 Exemption Available upto : FY 2016 – 17 • PAYMENT OF MAT : The Company is required to Pay minimum Alternative Tax (MAN) on Book Profits U/s 115JB of Income Tax Act. The Book Profit and MAT paid are : FIN YEAR Book Profit Rate% including Surcharge Rs. In Crores Amt and Education Cess of MAT Paid 2007-08 34.12 11.33 (10%+10%+3%) 3.88 2008-09 87.79 11.33 9.95 2009-10(Prov) 52.96 16.95 (15%+10%+3%) 9.00 34

36. THANK YOU