Uncertainty Shadows Hyderabad Metro Rail Phase-I Takeover and IRFC Loan Deal
The takeover of Hyderabad Metro Rail Phase-I faces fresh uncertainty following the stall of a Rs 13,537-crore IRFC loan agreement. With daily interest burdens mounting, the government has appointed a new consultant, SBICAPS, to re-evaluate the project, raising questions about previous financial arrangements.
Highlights
- •The Hyderabad Metro Rail Phase-I takeover faces uncertainty as a new consultant, SBICAPS, is appointed.
- •The initial Rs 13,537-crore loan agreement with the IRFC is effectively stalled, adding to the state's financial burden.
- •Interest payments on existing debt have surged, with current liabilities reportedly exceeding Rs 130 crore.
- •Questions remain regarding the status of the Rs 84.32-crore upfront fee paid to the IRFC and previous valuation findings.
The state government has encountered fresh challenges regarding the Hyderabad Metro Rail Phase-I takeover, leading to significant uncertainty. Following a decision by both central and state authorities, SBI Capital Markets Limited (SBICAPS) has been appointed as a consultant. This firm is tasked with assessing the project's valuation, organizing financing for the takeover, and determining appropriate lending agencies, which effectively puts previous agreements into question.
Status of the IRFC Loan Agreement
The status of the prior loan agreement, valued at Rs 13,537 crore, with the Indian Railway Finance Corporation (IRFC) remains unclear and is effectively considered cancelled. A tripartite agreement involving Hyderabad Metro Rail Limited (HMRL), L&T Metro Rail (Hyderabad) Limited, and the IRFC had been signed on May 25. This deal aimed to secure the first loan instalment by June 15 to refinance debt and facilitate the state’s acquisition of the project. However, the disbursement was unexpectedly halted, sparking a political dispute between the Congress and BJP.
The delay has placed a severe financial burden on the state. Under the takeover agreement finalized on April 29, the government assumed liability for L&T Metro Rail’s outstanding debt of Rs 13,538.53 crore. While the state had already contributed Rs 1,461 crore in equity for full ownership, the inability to refinance through the IRFC means the government must continue servicing high-interest loans. Officials report that the interest burden is rising by approximately Rs 2.5 crore daily, with total liabilities now exceeding Rs 130 crore.
Evaluation and Consultant Oversight
Chief Minister A. Revanth Reddy asserted that the state fulfilled all required conditions, including providing a state guarantee, depositing funds into an escrow account, and paying an upfront fee of Rs 84.32 crore. Despite these efforts, the expected funds were not released. The decision to appoint SBICAPS has raised eyebrows, particularly because the project had already undergone extensive due diligence by IDBI Capital and the Delhi Metro Rail Corporation consultancy arm.
Previous assessments by IDBI Capital valued the Hyderabad Metro Rail Phase-I assets between Rs 20,544 crore and Rs 22,102 crore. The government's current stance does not reference these findings, nor does it clarify the status of the Rs 84.32-crore upfront fee already paid to the IRFC. With SBICAPS now tasked with reviewing valuations and potential plans for Metro Phase-II, stakeholders are concerned that the entire project timeline is effectively returning to the drawing board.
