Engineering and construction major Larsen and Toubro (L&T) Limited is expecting to achieve financial closure for the Hyderabad Metro Rail (HMR) project by the end of February 2011.
“About 25 financial institutions have shown interest and we are currently in talks with major banks including ICICI, Punjab National Bank and Axis for tying up the debt component of the project. Considering the size of the project, we will go for more than one banker for raising debt. State Bank of India, which has a larger base and huge appetite for providing funds, is expected to emerge as the lead financier,” said VB Gadgil, chief executive officer and managing director of L&T Metro Rail.
He was speaking to mediapersons on the sidelines of ‘ParadiGM 2010’, a general management conclave organised by the Indian School of Business (ISB) here on Friday.
Stating that infrastructure projects of this scale would typically have a debt-equity ratio of 4:1, Gadgil said the Andhra Pradesh government had to fulfil certain obligations like 90 per cent right-of-way (RoW) for L&T to complete the financial closure.
“Around 90 per cent of the RoW is with the state government. It is envisaged that 100-feet corridor is required for the project. The government has already identified about nine-kilometre road where there may be some widening required and is yet to acquire some property. There are also issues pertaining to acquisition of land for a depot due to multiple ownership problems. The matter is now before the court and is expected to be resolved shortly,” Gadgil said.
The AP government had cancelled the Rs 12,132-crore HMR project awarded to the Maytas Infra-led consortium in 2009, as it failed to achieve financial closure in spite of extension of time. L&T bagged the project in July 2010, for which the Centre will provide a Rs 1,458-crore viability gap funding, while the state government will spend Rs 1,980 crore on acquiring 204 acre besides on relief and rehabilitation of the affected people.
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Gadgil said the company was looking at cashing in on the real estate available around the project as a major stream of revenues, particularly through OOH (out-of-home) and other advertising activities at depots, stations and on trains.
“We have 18.5 million floor space index related to the project and this makes it a viable project unlike Delhi Metro, which is not doing well as they do not have a big land track,” he said. The project was expected to be completed in five years, covering three high-density traffic corridors over a 70-kilometre route.
“Topographical survey is complete and we have started geo-technological explorations. This will help us cut down time for our engineering team by at least four months,” Gadgil said, adding once operational, the traffic demand per day was estimated to be 1.5 million passengers in 2014, which will go up to 2.2 million in 2024.