L&T Group looks to exit from Hyderabad Metro

Hyderabad Metro

L&T Group looks to exit from Hyderabad Metro


Hyderabad Metro: It's a part of the infra major's plans to move away from non-core biz; losses also weighing

Hyderabad Metro: Infrastructure major Larsen & Tourbo Ltd (L&T) is looking to exit from Rs 18,000-crore Hyderabad Metro Rail, the world's largest metro rail project executed in public-private-partnership model, as a part of its overall plans to move away from non-core businesses. The tight financial position that the mega project is in and the mounting losses are also said to be forcing the infrastructure behemoth to explore the exit option.

In a recent media interaction, SN Subrahmanyan, Chief Executive Officer, and Managing Director, L&T, made it amply clear that L&T would exit from the Hyderabad Metro Rail project. "We have invested in the Hyderabad Metro and the project has been completed in a very efficient way, very beautifully done and a lot of international acclaims have come for that, but we are not operators of the metro.

So, we would like to divest it in the future," he told a business television channel recently. Henceforth, L&T intends to concentrate on the business areas of EPC projects, defence manufacturing and IT services.

As a part of its strategy to exit from non-core businesses, L&T earlier this year sold its electrical and automation business to Schneider Electric for Rs 14,000 crore.

Next in the line for the divestment are Nabha Power Plant, L&T Infrastructure Development Projects Limited (L&T IDPL) in which L&T has 51 per cent stake, and Hyderabad Metro. The group is planning to use proceeds from these divestments for future investments.

However, sources say that mounting losses in the Hyderabad Metro are also forcing the infrastructure major to explore the exit option from the PPP project. According to the 2019-20 Annual Report of L&T Metro Rail (Hyderabad) Limited (L&TMRHL) which operates the Hyderabad Metro, the metro operator suffered a net loss of Rs 382 crore in the last fiscal. Its total revenues stood at Rs 1,370 crore. The company reported a net loss of Rs 149 crore on a revenue of Rs 1,634 crore in the previous financial year. It has liabilities of over Rs 16,000 crore.

Further, the ongoing Covid-19 pandemic compounded the mega project's financial woes. The Hyderabad Metro has lost over Rs 300 crore due to Covid-induced lockdown which lasted for 170 days. Though it resumed operations last month, the passenger traffic is yet to reach pre-Covid levels. "Serious efforts are underway to divest L&T's stake in the project. We are also discussing with the government for its support. Hopefully, something positive comes out, " the sources further said.

When contacted, a spokesperson for L&TMRHL said: "To overcome the huge financial burden on us, and for some respite, we are exploring different options with all related stakeholders". Due to Covid-19, HMR operations were suspended for about 170 days. Presently, our prime focus is to continue operations adhering to safety norms, the spokesperson added.

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