L&T plans to sell its Hyderabad Metro holding in 2.5 years.

2 Nov 2023 , 02:27 PM

Chief Financial Officer R Shankar Raman said on November 1 that engineering and construction giant Larsen & Toubro (L&T) is aiming to sell its interest in its Hyderabad metro project within the next two, perhaps two and a half years.

‘In two years, possibly two and a half years from now, we should be able to proposition this project (Hyderabad metro project) as an attractive investment to funds, maybe sovereign wealth funds, maybe PE funds, maybe some other REIT investors, we will have to figure out who at that point in time would be the interested suitors,’ Raman stated.

He continued by saying that L&T will keep selling land lots connected to the metro project for the next 25 years and that they have already made some headway in this regard from July to September.

‘We made a successful start in the quarter that just ended by selling almost 17 acres of the land that was attached to the metro project,’ Raman stated.

Raman continued, saying that although L&T’s intentions to sell have not seen any significant advancements as of yet, the business has made strides toward raising the project’s prominence for the Hyderabad metro.

‘The good news is quarter-on-quarter we are improving; improving the profile of the project, improving the economic prospects of the project etc,’ Raman stated. He further stated that ‘the value that we will realize by selling off this land, apart from it generating some profits from time to time will also help us unlock value which can be used to pay the debt down.’

In an effort to increase the project’s feasibility and appeal to potential purchasers, L&T is also determining when to disclose updated rates for its metro projects in Hyderabad, according to Raman.

‘The Hyderabad Metro is still running at the initial fixed tariff. ‘The project is due for a revision, as recommended by the tariff fixation committee,’ Raman stated. L&T is determining ‘the right time window for to announce the revision.’

He continued by saying that L&T used the Rs 900 crore Hyderabad metro soft credit, which was sanctioned by the Andhra Pradesh government, to pay down the project’s debt during Q2FY24.

Raman continued by saying that L&T will continue to pursue a soft credit totaling Rs 3,000 crore from the Andhra Pradesh government, which will be utilized to settle the project’s debt.

Additionally, he stated that the number of daily ridership for Hyderabad Metro increased to a peak of approximately 5.5 lakh in the quarter that concluded in September 2023, up from approximately 3.5-3.8 lakh a year earlier and 5 lakh daily ridership in the previous quarter.

About Rs 8,000 crore to Rs 9,000 crore worth of construction loans were refinanced by L&T last year.

In order to reduce the debt load, which was approximately Rs 13,000 crore as of September 30, 2022, the company refinanced the debt taken on for the development of Hyderabad Metro, resulting in a favourable interest rate outgo. The company also plans to monetize the real estate space of the metro network and is looking for government grants.

Additionally, L&T is attempting to bring on a co-investor for Hyderabad Metro. Currently, it owns 90% of the metro project; the Telangana government owns the remaining 10%. In the initial phase of its sale, L&T intends to reduce its ownership to 51 percent.

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