Telangana Plans Financial Revamp, Asset Monetisation for Hyderabad Metro Phase I Acquisition

The Telangana government has initiated the complex process of acquiring the 69-km Hyderabad Metro Rail Phase I network from Larsen & Toubro in a ₹15,000 crore deal that will rank among the largest takeovers ever undertaken by a state government in India.

The state is set to formally assume control of Phase I from April, though officials indicated that the transition will hinge on three critical areas: financial restructuring, transfer of assets and liabilities, and ensuring uninterrupted operations and maintenance.

On Monday, the state cabinet approved the purchase of a 100% equity stake in the project from L&T. The ₹15,000 crore valuation includes approximately ₹13,000 crore in debt and around ₹2,000 crore towards L&T’s equity component.

To facilitate the transaction, IDBI Capital Markets & Securities has been appointed as transaction adviser to conduct financial and legal due diligence. Technical due diligence and assessment of operational health will be carried out by Delhi Metro International Limited, a subsidiary of Delhi Metro Rail Corporation.

Hyderabad Metro Rail (HMR) managing director Sarfaraz Ahmad said the government is in discussions with the Indian Railway Finance Corporation for refinancing the existing debt. IRFC, a Navaratna company and subsidiary of Indian Railways, has expressed readiness to extend ₹13,000 crore, partly in Japanese yen and partly in rupees.

“The interest per annum will be significantly lower than the present loans, which are about 8%, and the repayment period will be around 20 years,” Ahmad said. He added that the debt is proposed to be serviced through fare-box and non-fare-box revenues. A comprehensive share purchase agreement covering all aspects of the transaction is expected to be signed between L&T and the state government soon.

To steer the acquisition, the government has constituted a committee of senior secretaries along with a cabinet sub-committee on resource mobilisation, which has already submitted its report.

One of the key post-takeover issues will be the future of government land allotted to L&T under the concession agreement. Of the 269 acres transferred, around 149 acres were utilised for metro corridors and depots. Of the remaining 120 acres, nearly 71 acres remain unmonetised, while about 49 acres were developed into transit-oriented commercial projects, including malls.

Once the transfer of assets and liabilities is completed, all developed and undeveloped land parcels will revert to the state government. Officials said fresh valuations of these properties and associated real estate assets will be undertaken before decisions are made on their future use.

Ensuring seamless services for commuters remains another top priority. Phase I operations are currently managed by Keolis, the France-based transport operator that has run the system since commercial operations began in 2017.

Sources said Keolis’s original five-year contract ended in November 2022 and was subsequently extended — first by three years until November 2025, and then by another year until November this year.

Officials indicated that the state is likely to retain Keolis for at least one more year beyond November, citing its expertise in automation and communication-based train control systems. According to HMR officials, the metro has achieved 90% passenger satisfaction and 99.5% punctuality under its management.

Officials underscored that maintaining service continuity while restructuring finances and assets will be crucial to successfully closing the takeover of one of India’s largest metro rail public-private partnership projects.