The era of L&T Metro Rail Hyderabad (L&TMRH) and the Public-Private Partnership (PPP) model for Phase 1 of the Hyderabad Metro Rail (HMR) is drawing to a close. The Telangana State government has now reached an agreement in principle to take full ownership of the project.
This landmark, one-time settlement will see the government disburse ₹2,100 crore to L&T for its equity investment, alongside assuming the project’s substantial debt, estimated at around ₹13,000 crore. This information was released in an official statement on Thursday, following crucial discussions between Chief Minister A. Revanth Reddy and L&T Chairman & Managing Director S.N. Subrahmanyan. These talks aimed to resolve existing issues and pave the way for the second phase of the metro project, which is currently awaiting central government approval for a joint venture with the State. The takeover process is designed to be smooth and mutually agreeable, ensuring all legal and statutory requirements are met. Interestingly, the Chief Minister had initially invited L&T to be an equity partner in the Phase 2 expansion, an offer that L&T ultimately declined.
During negotiations, Mr. Subrahmanyan also indicated L&T’s inability to commit to an integration pact for seamless operations, revenue sharing, and cost mechanisms between the existing Phase 1 and the proposed Phase 2. Consequently, L&T proposed divesting its entire stake in HMR Phase 1, thereby transitioning it into a state-owned entity. This led to comprehensive discussions covering financials, asset valuation, and strategies for debt restructuring.
L&T had requested the government to take over its ₹5,900 crore debt for the equity value, referencing a Supplementary Concession Agreement from July 22, 2022, under which the government still had a balance of ₹2,100 crore from a ₹3,000 crore interest-free loan. After extensive deliberations, both parties reached a settlement to accelerate the Central government’s approval for HMR Phase 2. The State government has already put forward proposals for eight new metro lines under Phase 2A and 2B, which would add an impressive 163 km to the network.
Previously, the Central government had expressed reservations about Phase 2 being managed by a government agency while Phase 1 remained a private enterprise. It had stipulated that a definitive operational integration agreement with L&T was necessary before further processing the Phase 2 proposal. Despite this, L&T chose not to participate in the Phase 2A and 2B projects.
Key officials present at these crucial discussions included Chief Secretary K. Ramakrishna Rao, Advisor (Urban Transport) N.V.S. Reddy, Finance Secretary Sandeep Kumar Sultania, MA&UD Secretary K. Ilambarithi, HMR MD Sarfaraz Ahmad, Principle Secretary to CM V. Seshadri, Secretary to CM K. Manicka Raj, L&T CMD advisor D.K. Sen, and L&TMRH MD & CEO K.V.B. Reddy, as stated in the press release.