HASSAN MANGALORE RAIL DEVELOPMENT COMPANY LIMITED

1. HASSAN MANGALORE RAIL DEVELOPMENT COMPANY LIMITED PROFILE

2. Board of Directors

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.

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 under section 80-IA of the Income Tax Act for 10 years from COD.

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 & operating costs of passenger services to be borne by 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

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

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. 

8. Project Financing Initial Project Cost `. 293 cr Construction Cost `. 275 cr RMV Equipment `. 4 cr Pre-operative exp & IDC `. 14 cr Revised Project Cost `. 367 cr Construction Cost `. 349 cr RMV Equipment `. 4 cr Pre-operative exp & IDC `. 14 cr Funding through Subordinate debt from IR `. 141 cr Equity `. 112 cr Term loans from banks `. 90 cr Revised construction cost is under examination for mutual acceptance.

9. 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.

10. 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 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 ` 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 `. 340 cr.

11. 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. 100% inflation of distance is allowed for the Ghat section of 55Km between SKLR-SBHR, thus making chargeable distance to 238.45Km from the actual distance of 183.45KM between HAS-MAQ (Rate circular No. 32 of 2006) Freight due to HMRDC from traffic carried on the line is calculated as per the inter zonal 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.

12. 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. Presently Banned in Karnataka. Iron ore for KIOCL pellet plant at Mangalore – Presently Banned in Karnataka Cement, Food grains and other general goods to Mangalore/ South Kerala area From Mangalore Area: Coal Fertilizer imports Limestone, Iron Ore Pellet – Presently not moving from Last 2 years. Fertilizer from MCF Mangalore, Ernakulam Kerala area, Trombay Bombay area . Food Grains from North India to Karnataka and Kerala. POL and LPG from Mangalore Refinery, Thokkur to Bangalore.

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

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 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.

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, Shrivagulu 6. Curves - Total – 110 80 - 85 Nos.- 30 to 50 - 25 Nos 7. Catch Sidings Donigal station – Shrivagilu Yedakumeri - Proposed

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

17. Line Capacity • The maximum number of trains that can be run in a day is Line Capacity which is decided by the time required to complete the journey by the slowest moving train in a critical block section. • The maximum permissible speed for all trains in the section between SBHR-SKLR is 30 KMPH • The Critical Block Section of HMRDC Line is DOGL-SVGL in the ghat section of SKLR-SBHR section, with the distance 35.60 KM the running time for DOGL-SVGL section is 71 minutes (35.6/30*60) • All the down trains are required to stop and start at reception signal to check the brake power • There are two stations, each requires 3 mins i.e total 6 mins • Total time required for the journey is 77 min (71+6 min) • The total number of trains that can be run (Line capacity) =18.70 trains (1440/77) • Time required for maintenance works is provided to the extent of 1.7 train paths (130Min (77*70/100+77)) • Balance paths remaining are 17 (18.70-1.70) • Total number of trains that can be run in a month 510 (17*30) i.e line capacity • Total number of passenger trains in a month that are running in the section is 85 i.e 1 daily train and 3 days a week [60+((6/7)*30=25)]=85 • Total number of paths available for goods train/ MT/LE/CLE in a month 425 (510-85) • Total number of paths available for goods train/ MT/LE/CLE in a day 14 • Efficiency factor is 80% of the capacity utilization i.e 340 trains (425*80/100) in a month

18. Operational Performance `. - Crores

19. Commodity wise Earnings (I) `. - Crores

20. Commodity wise Earnings (II) `. - Crores

21. Stock wise/Train Load Earnings 2012-13

22. Components of Fixed & Variable Costs

23. Detailed Note on Components of Fixed Cost Fixed costs: Manpower costs : The actual salary paid to the staff deployed on the section except crew. Other than Manpower cost : The cost of material/ stores required to keep the line fit for operations including contractors agreement entered for the same. Direct supervision charges : The cost not covered in the Manpower cost directly. Indirect Overheads : The costs which cannot be allocated to any known heads such as Medical, RPF, Pension etc. and paid on a percentage basis as per Yearly Summary of End Results published by Railway Board. This charge is deferred for ten years from the date of CoD. Misc. : E-460 Special Repair Breaches on actuals and B-700 Special Repair Accidents calculated on prorata GTKM basis.

24. Details of Man Power Cost since April 2009 Till June 2013

25. Note on Manpower Cost • 2009-10 Revised pay scales implemented and also 40% of the arrears w.e.f. 01.01.006 was released. • Rates of National Holiday, OT, Night Duty allowance etc also increased due to Pay Commission. • 2010-11 60% of the PC arrears was released. • Though increase in DA is announced in January and June but the amount is released in April and September respectively. • Bonus is released in October. • Annual increment is in July. • Staff strength in Engineering Department has been increased by 109 in June’12 hence total strength in the section as on 31.06.2013 is 591 which is less by 64 with the agreement.

26. Detailed Note on Components of Variable Cost Variable Cost Cost of fuel : (GTKM/1000)x(SFC)x(Rate per litre) Cost of crew : GTKM basis (expenses of (MYS div/GTKM of MYS div) x (SPV GTKM) Loco and wagon usage : (Time spent by locos in hrs and wagons in days) x (respective rates notified by RB from time to time) Running repairs of wagons : Pro-rata basis of (Total zonal expenses of Running Repairs)x (SPV Wagon days)/(Zonal Wagon Days) Documentation : Stationery cost Compensation claims: claim settlement and prevention organization (K210) and other claims under K230, K240 and K260 Indirect Overhead : The costs which cannot be allocated to any known heads such as Medical, RPF, Pension etc. and paid on a percentage basis as per Yearly Summary of End Results published by Railway Board. This charge is deferred for ten years from the date of Commercial operations. i.e. 05/05/2006. NOTE: GTKM – Gross Tonne Kilometer [Gross Load of the Train (both Load+Empty)+Loco Weight]

27. Review of O&M Costs

28. Income and Expenditure `. - Crores

29. Earnings

30. Performance of the Company ` - Crores

32. Fixed Assets `- Crores GAV – Gross Asset Value NAV – Net Asset Value

33. Capital Structure ` - Crores

34. Section Staff Position in HMRDC

35. Information and Communication Technology (ICT) • The Company has implemented need based ICT. • For Accounts, Tally software is used. • For Commercial & Operational transaction, FOIS & an in house developed program (backend/data base in MYSQL and Frontend in Dot Net) “FAITH” Freight Accounting Information Tool of HMRDC is in place. • The website of the Company is a dynamic one and all relevant information are made available therein. • Regular back-up of data is done in an external Hard Drive Disk. • All the Personal Computers are connected through LAN (Local Area Network) and antivirus software loaded.

36. INSURANCE 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 : 13th January 2014 to 12th January 2015 PREMIUM PAID : 2008 ` 33.60 Lakhs 2009 ` 40.08 Lakhs 2010 ` 69.53 Lakhs 2011 ` 93.75 Lakhs 2012 ` 58.62 Lakhs 2013 ` 84.59 Lakhs CLAIMS SETTLED : 2008 : Restoration Cost : ` 61 Lakhs Loss of Profit : ` 163 Lakhs (Received on 28.07.10) 2009 : Restoration Cost : ` 30.16 Lakhs Loss of profit : ` 245.76 Lakhs (Received on 31.03.11) Company has put up the Claim for Rs. 1.01 Cr for the year 2012-13 to the National Insurance Company as their were Landslides in the months of July’12 and August’12 .

37. 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 (MAT) on Book Profits u/s 115JB of Income Tax Act. The Book Profit and MAT/Income Tax paid are : FIN YEAR Book Profit Rate% including Surcharge ` In Crores Amt of and Education Cess MAT/Income Tax Paid 2007-08 34.12 11.33 (10%+10%+3%) 3.88 2008-09 87.79 11.33 (10%+10%+3%) 9.95 2009-10 43.31 16.995 (15%+10%+3%) 7.36 2010-11 23.83 19.93 (18%+7.5%+3%) 4.81 2011-12 (12.78) 20.01 (18.5%+5%+3%) 0.00 2012-13 14.67 32.445 (30%+5%+3%) 6.39

38. Looking to Future • SWOT Analysis : • Strengths : • The Only Railway Line passing through Western Ghats • connecting the major port of Karnataka with Hinterland. • Has got Line Capacity to transport 6 Million Tonnes of Traffic • per annum. • Stabilized Rail Link. • Entire Loan of `. 90 Cr. availed from Nationalized Banks • Completely Amortized within 3 years of CoD

39. Looking to Future • Weaknesses : • Dependence on a single Commodity (Iron-Ore/Export) which • is the Cash Cow. • Oligopolistic customers. • Capacity and Operational constraints due to steep gradient • ( 1 in 50) and more number of 8 degree Curves. • Multiple locos with AEBs used for hauling up Trains • Empty running of Locos and Rakes • Speed restrictions – 30 KMPH in Ghat Section. • Detention due to a variety of reasons. • Outstanding sub-debt (`78.78 Cr) and deferred OH (`69.54 Cr) • along with interest, if any. • The Cash Reserves of ` 198 Cr represent only DRF.

40. Looking to Future • Opportunities : • Steady Traffic with KIOCL expansion plans (Iron Ore Domestic) • Iron-Ore for Export market may commence upon lifting the ban. • Import of high grade non-coking Coal for proposed Steel Plants and • Coal for Power Plants, which will be moved from NMPT through • Hassan Mangalore Rail Line. • Diversification into development of Property Time Shares (with the • Land available) for heritage Tours and Trek to boost non-traditional • income. • Going for “Doubling” of the Line, avoiding Ghat Section (118 Kms • as against 55Kms of Ghat Section) with minimum impact on • Environment.

41. Looking to Future • Threats : • Higher Expenditure on Maintenance costs for retaining walls etc to • prevent landslides. • Huge Capital Expenditure for strengthening of bridges to permit • running of 25T Axle Load Trains. • Dwindling traffic movements. • Premature replacement of Assets due to denudation.

42. THANK YOU