Telangana Launches Monumental Hyderabad Metro Rail Acquisition from L&T
In a landmark move, the Telangana government has commenced the intricate process of acquiring the 69-kilometer Hyderabad Metro Rail network from Larsen & Toubro. This monumental transaction, valued at ₹15,000 crore, stands as one of the largest acquisitions ever undertaken by a state government in India, signaling a significant shift in urban infrastructure management.
Formal Takeover and Critical Transition Areas
The state government is set to formally assume control of phase I of the metro from April onward. However, officials emphasize that the transition hinges on three pivotal areas: financial restructuring, the transfer of assets and liabilities, and ensuring uninterrupted operations and maintenance. The state cabinet recently approved the purchase of a 100% equity stake in the phase I project from L&T, with the project's total valuation including ₹13,000 crore in debt and approximately ₹2,000 crore payable toward L&T's equity.
To facilitate this complex acquisition, IDBI Capital Markets & Securities has been appointed as the transaction adviser to conduct comprehensive financial and legal due diligence. Concurrently, Delhi Metro International Limited, a subsidiary of the Delhi Metro Rail Corporation, will undertake technical due diligence and assess the operational health of the metro system.
Financial Restructuring and Loan Arrangements
HMR managing director Sarfaraz Ahmad revealed that the state government is in advanced discussions with the Indian Railway Finance Corporation, a navaratna company and subsidiary of Indian Railways. IRFC is prepared to provide ₹13,000 crore in financing, with the loan structured partly in Japanese yen and partly in rupees. This arrangement offers a significantly lower annual interest rate, estimated at less than 8%, compared to existing loans, and features a repayment period extending up to 20 years.
"The debt is proposed to be serviced from the revenue generated from the fare box and non-fare box," Ahmad stated. "A share purchase agreement covering all aspects of the transaction will be entered into between L&T and the Telangana government in the near future."
Steering the Acquisition and Land Reversion
To oversee this massive acquisition, the government has established a committee comprising senior secretaries, alongside a cabinet sub-committee on resource mobilisation, which has already submitted its preliminary report. A crucial post-takeover issue involves the future of government land originally allotted to L&T under the concession agreement.
Out of the 269 acres transferred, approximately 149 acres were utilized for the metro network and depots. The remaining 120 acres include around 71 acres that remain undeveloped and nearly 49 acres developed as transit-oriented projects, such as shopping malls. Upon completion of the asset and liability transfer, all land—both developed and undeveloped—will revert to the state government. Officials have confirmed that valuations of these land parcels and associated real estate assets will be conducted to determine their optimal future use.
Ensuring Seamless Commuter Services
Maintaining uninterrupted services for daily commuters remains a top priority. Phase I operations are currently managed by Keolis, a France-based transport operator that has overseen the system since commercial operations commenced in 2017. Following the takeover, the state government is expected to retain Keolis for ongoing operations and maintenance, leveraging their expertise.
Sources indicate that the original five-year contract with Keolis concluded in November 2022 and has since been extended—first by three years until November 2025, and then by an additional year until November of this year. "The state government is likely to continue the services of Keolis for operations and maintenance for one more year beyond November, considering their extensive experience in automation and communication-based train control," HMR officials noted. "The operations have consistently achieved 90% passenger satisfaction and an impressive 99.5% punctuality rate."
Strategic Importance and Future Outlook
Officials underscored that maintaining service continuity while simultaneously restructuring finances and assets will be paramount to the successful conclusion of this takeover. This acquisition represents one of India's largest metro rail public-private partnership projects, and its smooth execution could set a precedent for future urban transit initiatives across the country. The Telangana government's proactive approach aims to balance fiscal responsibility with operational excellence, ensuring the Hyderabad Metro Rail continues to serve as a vital backbone for the city's transportation network.
