L&T Metro Rail (Hyderabad) Limited, the concessionaire for the Rs 14,132-crore Hyderabad metro rail project, today announced completion of financial closure with the State Bank of India-led consortium committing a debt component of Rs 11,480 crore .
Ten banks led by SBI have sanctioned the entire debt component at 10.5 per cent rate of interest, 255 basis points above the normal lending rates, according to K Venkatesh, who is on the boards of both L&T Hyderabad Metro and L&T's project financing subsidiary, L&T Infrastructure Development Project Limited, which brings in the equity portion of the project along with the parent company.
Terming it as a transformational project for the city like their Cyber Towers project 12 years ago, YM Deosthalee, chairman L&T Metro Rail (Hyderabad) Limited, said the equity and investment of the project were the biggest-ever committed by any corporate on a single project in any city. The company could achieve financial closure despite political disturbances in the city owing to its track record of completing projects on schedule and within the cost, he said.
The project cost is Rs 2,000 crore higher than the Rs 12,132 crore estimated in 2008. However, this would not impact either the fare or the government's obligations, said NVS Reddy, managing director of Hyderabad Metro Rail Project. "Our interest lies in keeping the project cost low as the company alone will be taking the impact of any escalation," Deosthalee said, adding that the original cost estimate had not been taken into account due to several factors including interest payable during the construction period. Revenues from all streams would be credited in the escrow account, which has to first take care of operations and maintenance, and other recurring expenditure besides interest payment before coming to the returns on equity.
The company also does not see any problem in raising around Rs 3,440 crore equity capital as it has enough resources and it is only required to be spent over a period of 2-3 years, Deosthalee said. However, he said they would look at equity dilution after five years when the project is complete. It is expected to breakeven in three years.
The public-partnership project comprises 71.16 km of elevated metro rail in three busy corridors of the city along with 25 stations and a provision to develop 18.5 million sft of transit-oriented commercial real estate development. The company expects ridership and commercial space to contribute equally to the revenues of the project, which is scheduled to be commissioned in 2016.
All the three routes along with phase one of commercial real estate development, involving Rs 2,243 crore of the total project, will be taken up simultaneously. The metro rail system is expected to handle 1.4 million passengers a day. According to Reddy, 3 million of the current 9 million traffic in the city is causing traffic jams and the metro together with the multimodal transport system will be able to address this effectively.
L&T had bagged the project by quoting the lowest requirement of Rs 1,458 crore under viability gap funding from the Centre after the Andhra Pradesh government cancelled the concessionaire agreement of the project awarded to Maytas Infra Limited, run by the family of Satyam Computer Services Limited founder B Ramalinga Raju.
The company has been given a concession period of 35 years, including the construction period of 5 years, and can be extended by another 25 years, on a build, operate and transfer (BOT) basis.
