Who will drive Hyderabad metro next?

Infrastructure major Larsen and Toubro Limited (L&T) has expressed its intention to exit the Hyderabad Metro Rail project, citing mounting operational and accumulated losses. The company has offered to offload its over 90 per cent stake in the project to either the Telangana government or the Government of India through a new Special Purpose Vehicle (SPV).

In a letter to the Ministry of Housing and Urban Affairs (MoHUA) last month, L&T Metro Rail said it has been facing financial distress due to lack of expected support from the Telangana government. The company noted that repeated follow-ups for financial assistance had not yielded results, further worsening the situation.

“Under these circumstances, we remain open to offering our equity stake in the existing metro network for purchase by the GoTG (Government of Telangana) or GoI (Government of India) through a new SPV and take over the Phase-I and its operations and maintenance together with Phase-II A and Phase-II B,” the letter stated.

The concessionaire attributed the financial strain to structural, financial, and regulatory challenges, including delays caused by property acquisition, right-of-way issues, alignment changes, and utility shifting. These factors led to significant cost and time overruns.

According to the company’s 2024-25 annual report, revenue from operations and other income fell to Rs 1,108.54 crore, down 21 per cent from Rs 1,399.31 crore in the previous fiscal. Losses before and after tax widened to Rs 625.88 crore compared to Rs 555.04 crore in 2023-24, marking a 13 per cent increase.

L&T signed the Concession Agreement with the then undivided Government of Andhra Pradesh in September 2010 and achieved financial closure in March 2011, with a consortium of 10 banks led by SBI funding the debt. The firm submitted claims of Rs 3,756 crore to the state in March 2017, which grew to Rs 5,000 crore by the time the metro was fully commissioned in February 2020.

The company also cited the impact of the Covid-19 pandemic, which forced a 169-day shutdown and continues to affect ridership due to remote working trends. L&T further confirmed it cannot participate in the state government’s Phase-II expansion projects as a PPP partner.