A logo of L&T.
Credit: REUTERS
Hyderabad: India's infrastructure giant L&T will exit the Hyderabad Metro project as the Telangana government assumes operational control. The state will take over the Phase 1 Metro Rail project by assuming approximately Rs 13,000 crore in current debt and providing a one-time settlement of Rs 2,000 crore for L&T's equity investment in L&T Metro Rail Hyderabad Limited (LTMRHL).
The settlement was finalised during a meeting between Telangana Chief Minister A Revanth Reddy and L&T's CMD SN Subrahmanyan on Thursday evening. While L&T initially proposed that the state assume the full debt and pay an additional Rs 5,900 crore for equity value, the final settlement was negotiated down to Rs 2,000 crore.
The arrangement protects public interest while enabling early approval for metro system expansion—a critical need, as Hyderabad has slipped from second position nationally in metro network length in 2014 to ninth position currently.
The takeover stems from L&T's inability to participate in Phase 2 expansion. The company cited its strategic exit from transportation concession asset ownership and operations, stating it cannot serve as an equity partner in the upcoming expansion.
To meet growing public transport demand, Telangana has submitted proposals for eight new metro lines under Phase 2A & 2B expansion, covering approximately 163 km of additional network. However, the Government of India raised concerns about operational integration between the existing private concession-developed Phase 1 and the proposed government agency-managed Phase 2.
The Centre stressed the need for a Definitive Agreement ensuring seamless operations and appropriate revenue/cost sharing mechanisms. It suggested L&T could participate in Phase 2 as a joint venture partner with the central and state governments.
During discussions to resolve the deadlock existing since November 2024, Chief Minister Revanth Reddy emphasised the state's preference for L&T's continued Phase 2 participation. However, Subrahmanyan reiterated the company's exit from transportation concession businesses.
The Chief Minister highlighted the importance of finalising a Definitive Agreement for Phase 1-Phase 2 operational integration, as mandated by the Government of India for further Phase 2 proposal processing.
L&T's CMD expressed concerns about smooth train operations and revenue/cost-sharing issues, stating they could not sign the Definitive Agreement under present circumstances. As an alternative, L&T proposed divesting their complete Phase 1 stake to create a fully state-controlled entity.
During negotiations, L&T also referenced the July 22, 2022 Supplementary Concession Agreement, under which Rs 2,100 crore remains due from the state government out of an agreed Rs 3,000 crore interest-free loan.
The final agreement enables expedited Government of India approval for Phase 2 while ensuring operational continuity.