Project Management and Finance

Hyderabad Metro

Submitted By:
Group No 12 (Section B)
Marco Pantaleoni | Marine Croze| Sabyasachi Das| Saurabh Chaudhary
2/6/17 1
 PROJECT INTRODUCTION
Hyderabad Metro Rail Project is the World's Largest Public-Private
Partnership Project (PPP) in the Metro Sector.
It compromises of three high density corridors, Metro Rail
Network will cover a total distance of around 72 km comprising
ultra-modern station buildings.
Corridor I: Miyapur LB Nagar : 29 kms; 27 stations.
Corridor II: JBS Falaknuma : 15 kms; 16 stations.
Corridor III: Nagole Shilparamam : 28 kms; 23 stations.
Larsen and Toubro Limited was
awarded the Hyderabad Metro Rail
Project by Government of Andhra
Pradesh. L&T incorporated a Special
Purpose Vehicle - L&T Metro Rail
(Hyderabad) Limited to complete
the project.
 PROJECT INTRODUCTION
PPP PROJECT STRUCTURE : Design, Build, Finance, Operate and
Transfer project (DBFOT)

GOVERNMENT / PUBLIC SECTOR ENTITIES: Telangana (previously

Andhra Pradesh)

PRIVATE SPONSORS: L&T Construction

DEBT PROVIDERS: A consortium of 10 banks led by the State Bank

of India sanctioned the entire debt requirement of the project

ESTIMATED PROJECT COST:

15,975 crores (as of March 2014)
14,132 crores (offical cost estimation)

CONCESSION PERIOD:
35 years
with a 5-years construction period
Extendable by 25 years
 KEY MILESTONES

MARCH JUNE 2012

JULY 2008 JULY 2017
2011 Commencement
Initial biding Construction
Financial of Construction
completed
closure phase II

APRIL 2012
MARCH 2015
JULY 2010 Commencement
Commencement
Re-biding of construction
of operations
phase I
 SPV: L&T Metro Rail Pvt Ltd
Financial closure achieved on April 5, 2011 in a record time of 6
months
Largest fund tie up in India for PPP
Project cost estimated during commissioning: Rs 16,378 cr
Interest rate agreed
L&T Metro initially:
Rail Floating interest rate of 10.5%
Interest rate in May, 2011:
11.25%
Viability 225 basis points above SBI base
Debt
(Rs 11,480 cr=
L&T Gap lending rate
9,906(metro rail) (Rs 3,440 funding Repayable in 36 quarterly
+1,574(real
estate) cr) (Rs1,458 instalments starting September
cr) About Viability Gap
2018
Lenders: Punjab & Sind funding
SBI Bank Under VGF, the central
Canara Bank State Bank of government meets up to
Indian Bank Hyderabad 20% of capital cost of a
Indian Overseas State Bank of project being
Bank Mysore implemented in PPP
J&K Bank State Bank of mode by a central ministry,
Patiala state government, statutory
 Reason and Relevance of
Study
The division of Andhra Pradesh has led to a change in the
financial outcomes of the project both for the private sponsors
and bank consortium along with the new government.
Given the fact, Hyderabad would now be a part of state of
Telangana, the private sponsor L&T is now unsure of the project
viability. L&T has threatened multiple times to pull of the
project.
We have taken up this case to depict the altered cash flows and
determine whether the project is still feasible or not for L&T.
 Current problem being faced
We would like to illustrate the problem by providing this
excerpt from a letter written by L&T to the Andhra
Government.

The letter by L&T Metros MD, Mr. Gadgil, to the MD of HMR is dated
10th September 2014. It runs into 8 pages. In the letter, Gadgil cites 7
letters of correspondence between L&T, HMR and Chief Minister of
erstwhile AP from February 6, 2014 to July 15, 2014. He raises two
main issues in the letter. 1. Delay in providing Right of Way (ROW) for
faster execution of works as per the Concession Agreement. Providing
ROW is the obligation of the Govt of AP/T. 2. He raises the changed
circumstances in the status of Hyderabad due to division of AP
and its adverse impact on the financial viability of the metro.
In point 16, it is argued that Prior to bifurcation of Andhra Pradesh,
Hyderabad was the capital city of a state which was well developed,
espousing various eminent districts and port towns. However, now it is
the capital city of a smaller state with lesser resources than the
undivided Andhra Pradesh. Further, there is reduction in the strength
of representation of the State in the Parliament. Thus, the position of
Hyderabad in drawing investments, both the Central
 Objectives of the study

1. Will the bank consortium led by State Bank of India continue to

finance the debt or pull back?
2. How has the returns for L&T change post the bifurcation of
Andhra Pradesh?
3. Is the project still viable with any other alternative?
4. How has the project dynamics changed since Government of
Telegana stepped in for Andhra Pradesh Government?
5. How is Delhi Metro Contributing to the Hyderabad Metro?
 Data Sources

1. Executive Summary of Hyderabad Metro Project Detailed

Project Report (DPR)
2. Social Cost-Benefit Analysis of Delhi Metro Report by M N
Murty, Kishore Kumar Dhavala, Meenakshi Ghosh and Rashmi
Singh http://mpra.ub.uni-muenchen.de/14465/
3. Annual Audited Accounts of L&T Metro Rail 2012-13
4. Projectstoday.com

Executive Annual Report

Summary 2012-13
 Bibliography
1. http://
www.larsentoubro.com/lntcorporate/common/ui_templates/Ht
mlContainer.aspx?res=P_MET_AABT_BABT
2. http://hyderabad-metrorail-project.blogspot.in/
3. http://
www.delhimetrorail.com/projectsupdate/consultancy_project.as
px
4. http://
www.business-standard.com/article/companies/hyderabad-met
ro-ties-up-fund-111040600101_1.html
5. http://
www.livemint.com/Companies/1dGg0OBUor3nWfKu1wRaTK/LT-pla
to-finalize-vendors-for-Metro-rail-project-by-Feb.html
6. http://hmr.gov.in/PDF/executive-summary.pdf
7. http://hmr.gov.in/PDF/go-rt-no-978-23-08-10.pdf
8. http://hmr.gov.in/projectdescription.html
 Thank You

2/6/17 11