Kochi: A high-level delegation from Cochin International Airport Ltd (CIAL) will leave for New Delhi early next month for discussions with Hudco to finalise the latter’s proposal to convert a portion of its loan component into equity in the airport company.

Both CIAL and Hudco have agreed in principle to convert at least 20 per cent of the loan as equity. The decision now awaits the clearance of the Hudco board and the Planning Commission.

Sources say Union Minister of State for Urban Development O Rajagopal is quite keen on this proposal. He discussed the issue with CIAL managing director C Babu Rajeev before leaving for New Delhi on 23 August 2002. The Hudco component in CIAL amounts to Rs 139 crore.

“We expect Hudco to convert at least Rs 28 crore as equity in the company. This will be highly beneficial to CIAL as it will not only reduce the debt burden but will help widen the capital base,” the sources add.

The airport company has also requested Hudco to reduce the interest rate from the current 16 per cent to the prevailing level in the banking sector. The prevailing interest rate is around 11 to 12 per cent.

“We hope Hudco will reduce its interest and this will help CIAL considerably to manage its debts,” top CIAL officials say. The interest rate issue will also be discussed in the September 2002 meeting.

If Hudco decides to convert its loan as equity, it will be a first-of-its-kind investment in India’s infrastructure scenario. This will also help CIAL to close its rights issue, which is now facing rough weather.

“A final decision in this regard will be taken only after the issue is discussed at the Hudco board,” says Rajagopal. “It also has to be referred to the Planning Commission for a final ratification. The urban development ministry, however, is all for it.”

Babu Rajeev is more hopeful. “We’re getting extremely positive signals. Given the potential of the airport, we think Hudco will come up with a feasible arrangement.”