Latest News | L&T Hopeful of CM Rescuing Struggling H'bad Metro

Mumbai, Oct 28 (PTI) Larsen & Toubro (L&T), the promoter of Hyderabad Metro, is hopeful of the state government rescuing the struggling Rs 19,500-crore rail project by restructuring the debt that runs into Rs 14,000 crore.

Earlier this month, the company had sought financial assistance from the Telangana government to save it from a deep cash crisis triggered by the pandemic-induced lockdown which had shut it for six months.

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Since the middle of this month, the company has resumed services and the ridership is around 1 lakh per day which is a far cry from the pre-lockdown days, the company said.

L&T Group chief executive SN Subrahmanyan, who had last month warned of exiting the heavily loss-making metro, however on Wednesday sounded confident of a solution with some financial assistance from the state.

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"I am personally in touch with Chief Minister K Chandrashekar Rao. He has personally assured me of financial help which includes restricting the debt that runs into Rs 14,000 crore and our interest burden is Rs 1,400 crore. And our discussions are at a sensible stage now,” Subrahmanyan told reporters during the concall.

"The chief minister personally assured me that he will look into the matter and do the needful. I hope he will do whatever it takes to continue to run the metro,” he said, adding this is the state's project as L&T is not the operator of the metro.

He pointed out globally metros are owned by the respective governments and this probably is the only large project which will be in private hands.

Last month he had said that since they are not the operators of the metro, given the mounting losses in the overall interest of the shareholders they would not mind exiting the metro project which was dogged from early on.

“Since we are not the operators of the metro, we would like to divest it in the future and take the money and so some other project or take the proceeds for some other forward investments," he had said in a media interaction.

"While we are seeking the state help to restructure the debt, we are also in discussion with our lenders led by State Bank of India exploring refinance the debt.

"It is a long haul and the process will take time as it involves many parties. I hope and wish better sense and good sense will prevail. After all its their (Telangana government's) project and I hope they will not abandon it,” Subrahmanyan said.

This is a huge project with a capital investment of over Rs 19,500 crore. Of this Rs 14,000 crore is debt which involves a monthly interest outgo of Rs 1,400 crore, L&T chief financial officer Shankar Raman told reporters this evening during the earnings concall.

The problem is that the Telangana government itself facing a severe financial crunch due to the pandemic and may not be able to oblige.

L&T has the option to invoke the force majeure clause in the concession agreement and claim compensation for the revenue lost due to the lockdown. But the company management did not mention anything to that effect.

Hyderabad Metro can invoke the clause to not abide by the terms of the agreement in the case of unforeseen events as defined under the section on force majeure. But for this clause to be invoked the metro should have been shut for 180 days while here it was closed for 169 days.

The metro operates across the city on three lines, covering 69.2 km.

Media reports earlier had pegged the losses of the metro to the tune of more than Rs 300 crore due to the shutdown.

Hyderabad Metro has been in the thick of controversy from the very beginning. The project was handed over to Maytas, a company floated by Ramalinga Raju of the Satyam scam in 2008 and he had promised to pay the state a huge licence fee to land the project.

But Raju could not begin the project as his confession about wrongdoing at Satyam in January 2009, made the metro project go kaput. It was launched afresh with a new tendering process and L&T won the project.

L&T has also been granted a VGF of Rs 1,458 crore. Of this, Rs 1,200 crore has already been paid. The VGF is paid by the Centre. Additionally, real estate was also handed over to the L&T-promoted Hyderabad Metro rail.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)