L&T exits L&T Metro Rail Hyderabad; signs SPA with Telangana Government's HML for 100% stake sale
After more than a decade of operating India's largest fully-private metro project, Larsen & Toubro has signed a definitive Share Purchase Agreement to exit L&T Metro Rail Hyderabad Limited.
The Telangana Government's special purpose vehicle Hyderabad Metro Limited will acquire 100% of the equity.
The deal — disclosed under SEBI LODR Regulation 30 — closes a chapter that began in 2010 when L&T won the 69.2 km Hyderabad Metro concession on a viability gap funding model.
The project eventually saw costs balloon to over Rs 22,000 crore against original estimates of Rs 14,132 crore.
PPP structure and financial stress
The original concession was structured as a 35-year Design-Build-Finance-Operate-Transfer model, one of the most ambitious PPP frameworks attempted in Indian urban infrastructure.
L&T committed equity and raised project debt on the premise that ridership would reach 1.7 million passengers per day by 2021 — a forecast that never materialised.
By FY24, daily ridership had plateaued at around 4.5-5 lakh, making the project fundamentally unviable without a substantial fare revision that the state government consistently refused to grant.
The resulting financial stress saw L&T carrying accumulated losses in LTMRHL's books and making impairment provisions at the parent level across multiple quarters.
Transaction structure
The transaction structure, while not yet fully disclosed, is understood to involve HML assuming the existing senior debt facility, estimated at Rs 13,000-14,000 crore as of FY25.
It also includes a combination of equity payment and government guarantees on residual obligations.
L&T had been carrying significant impairment provisions against its LTMRHL exposure in recent quarters.
The exit will materially clean up the parent company's consolidated balance sheet ahead of its FY26 close.
L&T's infrastructure development segment, which has historically weighed on the conglomerate's return ratios, is expected to see a meaningful improvement in return on equity post-transaction.
State ownership and expansion
For the Telangana Government, taking the metro back under public ownership realises a long-standing political commitment by Chief Minister Revanth Reddy.
It also resolves years of fare-hike disputes, ridership shortfalls, and revenue-sharing friction with the concessionaire.
The state is expected to roll the asset into a broader urban-mobility holding structure that will also house the upcoming Phase-II expansion connecting Nagole, BHEL, and Shamshabad Airport.
This will add approximately 32 km to the network.
Wider infrastructure template
The transaction is likely to set a template for other stranded PPP infrastructure assets — particularly in metros, expressways, and airports — where private concessionaires have struggled with traffic-risk-heavy contracts.
The Hyderabad exit will be studied alongside Mumbai Metro One and the GMR-GVK airport restructurings as a reference point for how India resolves the growing backlog of PPP assets requiring state recapitalisation.
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