Engineering and construction major Larsen & Toubro (L&T) is working to divest its stake in its Hyderabad metro project in the next two, possibly two and a half years, Chief Financial Officer R Shankar Raman told Moneycontrol on November 1.
"In two years, possibly two and a half years from now, we should be able to proposition this project (Hyderabad metro project) as an attractive investment to funds, maybe sovereign wealth funds, maybe PE funds, maybe some other REIT investors, we will have to figure out who at that point in time would be the interested suitors," Raman said.
He added that for the next two and a half years, L&T will continue selling land parcels attached to the metro project and has already made some progress on the same in July-September.
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"We made a successful start in the quarter that just ended by selling almost 17 acres of the land that was attached to the metro project," Raman said.
Raman added that while there has not been any big development in the divestment plans of L&T for now, the company has made progress in improving the profile of the Hyderabad metro project.
"The good news is quarter-on-quarter we are improving; improving the profile of the project, improving the economic prospects of the project etc," Raman said, adding that, "the value that we will realize by selling off this land, apart from it generating some profits from time to time will also help us unlock value which can be used to pay the debt down."
L&T is also working to identify the right time to announce revised tariffs for its Hyderabad metro projects in a bid to improve the viability of the project and make it more attractive for potential buyers, Raman said.
"We are still operating (the Hyderabad Metro) at the first tariff that was fixed. The tariff fixation committee has recommended that the project is due for a revision," Raman said, adding, that L&T is identifying "the right time window for to announce the revision."
He added that during Q2FY24, L&T has availed Rs 900 crore of the Hyderabad metro soft loan approved by the Andhra Pradesh government and has used it to repay the debt of the project.
Raman added that going forward, L&T will work towards receiving a total of Rs 3,000 crore of soft loan from the Andhra Pradesh government which will be used to repay the debt of the project.
He also said that the daily ridership of Hyderabad Metro has risen to a peak of around 5.5 lakh passengers in the quarter ended September 2023 from 5 lakh daily passengers in the previous quarter, and around 3.5-3.8 lakh daily passengers a year ago.
Raman had last year told Moneycontrol that L&T's plan to derisk its holdings in Hyderabad Metro is likely to be a 2-3 year process as the metro project is still recovering from the aftermath of the COVID-19 pandemic and will take a while before becoming an attractive asset that will fetch higher valuation.
L&T had last year refinanced around Rs 8,000 crore - Rs 9,000 crore of construction loans.
The company had refinanced the debt undertaken for the development of Hyderabad Metro leading to a favorable interest rate outgo and is planning for monetization of the real estate space of the metro network and seeking government grants to be able to lower the debt burden, which stood at about Rs 13,000 crore as of September 30, 2022.
L&T is also working to onboard a co-investor for Hyderabad Metro. It currently holds a 90 percent stake in the metro project with the remaining held by the Telangana Government. L&T plans to bring down its stake to 51 percent in the first stage of its divestment.
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