Our revenue plans derailed due to delay in Commercial Operations: L&T Hyderabad Metro Rail

Hyderabad:  Worried at the inordinate delay in commissioning of the metro rail, project concessionaire Larsen & Toubro (L&T) is planning to fast-track the sale of commercial spaces, which they see as a major source of revenue.

The first stage of the train service between Nagole and Mettuguda was supposed to be launched on March 21, in which case L&T would have started earning revenue from both fare collection and transit-oriented development (TOD), which includes leasing out retail spaces and selling advertisement spaces in seven stations on that stretch.

But with the state government postponing the launch to next year, the company’s revenue plan got derailed. Now, in a bid to make up for the losses, the engineering major is focusing on speedy construction of malls and multiplexes as part of the TOD allowed in the concession agreement. This has become of critical importance to L&T in view of the cost of the project overshooting the original estimate. While the initial estimation was Rs 14,370 crore, it has reportedly crossed Rs 20,000 crore.

A senior company official said two of four commercial malls would be opened by the year-end and L&T has paid the mandatory charges for the GHMC clearances last week.

“The malls that are coming up at Punjagutta and Madhapur are scheduled to be operational by November-December. Aggressive marketing is underway to sell retail spaces in these malls to brands across the verticals,” said P R Ravikumar, joint general manager, transit orient development of L&T Metro Rail (Hyderabad). Another mall in Madhapur is scheduled to be functional in August next year, Ravikumar added.

Overall, L&T has been given 20 land parcels in the city amounting to 259 acres, out of which it is allowed to utilize 18.5 million square feet for the TOD. Of this, 18 million square feet is being utilized to build four malls at Erram Manzil, Punjagutta, Madhapur and Musarambagh. And 0.5 million square feet is for building retail and advertisement spaces in the metro stations.

Since the TOD is designed to fetch 50 per cent of the total revenue, L&T is hard selling the commercial and office spaces in malls and over 1,000 retail outlets across the 64 stations that are to come up along the three corridors of the metro rail project. L&T is expecting not less than Rs 500 crore from the TOD.

“The commercial spaces in the stations are going to be particularly important for us. With convenience stores and retail shops coming up in the non-paid areas of the stations, the commercial space would be thrown open for both commuters and non-commuters,” said Sanjay Kapoor, general manager, advertisement and station retail of L&T Metro Rail (Hyderabad).

Works had been speeded up, Kapoor said with the aim to kick start the revenue generating engine at the earliest.

Though L&T wants to generate revenue at the earliest, this may not prove to be an easy road as the company requires the cooperation of the state government. As per the rules of the concession agreement, the train service must be commissioned on at least one of the stretches before L&T launches the TOD. But with the TRS government wanting to time the first stretch with the GHMC elections, L&T’s revenue plans are mired in uncertainty.

“The government wants a metro train service which is relevant to the commuters. This cannot be achieved if the train service is commissioned in a piecemeal manner. Let us wait for the completion of the works along a stretch covering a substantial distance,” said deputy chief minister Mahmad Mahmood Ali.

However, with the high court determined about the GHMC elections being held at the earliest, L&T is hopeful of launching the malls by the year-end.

Having embarked on an aggressive marketing strategy, L&T is also into a recruitment spree. A source said that in a period of four days last week, the company hired over 500 marketing executives at senior and middle levels, tasking them with the assignment of roping in customers for retail spaces in malls and stations. Sources said that even senior officials from other departments have been realigned to market the retail spaces.

The malls that are coming up at Punjagutta and Madhapur are scheduled to be operational by November-December. Aggressive marketing is underway to sell retail spaces in these malls – P R Ravikumar, Joint General Manager, TOD, L&T Metro Rail (Hyderabad).