Hyderabad: At least two foreign investors from Singapore and Canada have evinced interest in investing in L&T Metro Rail Hyderabad Ltd, which is developing a 72-km elevated metro rail project with an investment of ₹14,132 crore.
The L&T Metro is however not interested in divesting equity stake in the project now but is focussing on raising cheaper debt to swap high cost debt and bring down the impact of high interest rates, inflation and a strong dollar on the company’s finances, according to VB Gadgil, Chief Executive and Managing Director of L&T HMRL.
Without naming the companies which have shown interest, he said, “At this point, we are not interested in stake dilution, as this may be considered at a later stage. The focus is on bringing down the cost of funds.”
The metro executive said that about 40 per cent of the project works have been completed so far and the project is progressing. VG Gadgil took time off to explain the project progress and the way forward. Edited excerpts:
How do you rate the project progress? Is it on course for completion as per schedule?
We have completed more than 40 per cent of the work so far. Test runs have begun and trial runs may take place by the end of the year. Stage one of the 8 km stretch of the 72 km project is slated for commissioning by March 2015. However, at times, I feel, work could have progressed a little faster, though the progress so far is heartening. The entire project is expected to be ready by 2017.
How much have you invested on the project so far and any progress in terms of raising funds?
We have invested more than ₹4,200 crore so far, including ₹1,400 crore in equity. The funds for the project have been tied up long back. But interest rates are ruling high at 12.5 per cent. Therefore, we are looking at lower cost debt, which will be useful to swap debt. This is being done at the holding company L&T IDPL.
We were in the process of raising ₹1,000 crore from external commercial borrowings (ECBs), but the elections and change in Government delayed the process. We hope to conclude this soon. We are also looking at cheaper debt of about ₹2,000 crore to swap the higher cost debt.
There has been talk about change in project alignment? What is your say?
No comments on this.
You have begun test runs. What next?
Test run phase is a complex process undertaken by several vendors, be it rail coaches, signalling and communication etc. It is a long process and continues for several weeks. This requires great coordination between different aspects of metro rail and also its vendors. The question is about passenger safety, where even impact of malfunction is tested. Thereafter, trial runs will commence.
Do you see the prospect of cost escalation?
As of now, there has been some cost escalation. However, we need to see how this pans out till the entire project gets commissioned. In projects of such magnitude, various escalation issues are factored.
Yet at times, escalation could go beyond expectation. The interest rates have been ruling high for far too long, the Rupee has devalued and inflation continues unabated. So escalation is a matter of concern. Therefore, we are looking at cheaper fund access.
You have real estate development as one of the important components of the project. What is the progress so far?
We have planned to develop 6 million sq ft of commercial real estate space as part of the metro project development with an outlay of ₹2,000 crore.
We have begun work on three big complexes in the city that are expected to be completed by October 2015. Several multiplex companies and retail chains, among others, too are knocking at us. (Courtesy: The Hindu)