Summary
Larsen & Toubro (L&T) is considering selling its 90% stake in the Hyderabad Metro project after 2026 due to declining ridership. R Shankar Raman, L&T’s director, attributes this decline to the state government’s free bus scheme, which has shifted commuters’ preferences. He highlights a gender disparity in transportation, where buses primarily serve women beneficiaries, while men increasingly opt for railway travel. To alleviate financial strain, L&T secured a Rs 3,000 crore soft loan from the Telangana government and plans to monetize real estate assets associated with the metro system. Despite operational hurdles, L&T reported a 10.2% increase in consolidated net profit in the March quarter. The company seeks to balance financial sustainability with meeting commuter needs as it navigates the complexities of urban transit management.
L&T Eyes Sale of Hyderabad Metro Post 2026 Amidst Free Bus Scheme Impact: CFO
Larsen & Toubro (L&T) is considering selling off its stake in the Hyderabad Metro project after 2026, citing the impact of the Telangana government’s free bus scheme on ridership. In an exclusive interview with Business Today TV, R Shankar Raman, L&T’s president and CFO, revealed insights into the company’s future plans and the challenges posed by shifting transportation dynamics in Hyderabad.
Challenges with Ridership:
L&T, which holds a 90% stake in the Hyderabad Metro project, expressed concerns over declining ridership due to the state government’s Mahalakshmi bus scheme offering free rides to women and transgenders. Raman highlighted a gender distribution trend, noting that women predominantly use buses while men opt for the metro, resulting in financial strain on the project.
Financial Implications and Monetization Strategies:
To alleviate the financial burden, L&T negotiated a Rs 3,000 crore soft loan with the Telangana government and is exploring avenues for monetizing real estate assets associated with the metro system. Raman suggested that post-2026, the metro project could attract investor interest, particularly from pension and global funds, given its long concession period.
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Impact of State Policies:
While acknowledging the state government’s efforts to promote public transportation, Raman cautioned against overreliance on policies that could disrupt the transportation ecosystem. He emphasized the need for a balanced approach, considering the city’s diverse commuting needs and the sustainability of transportation initiatives.
Financial Performance and Outlook:
Amidst these challenges, L&T reported a 10.2% increase in consolidated net profit in the March quarter, reflecting resilience in the face of operational challenges. However, Raman underscored the importance of strategic decisions and sustainable policies to ensure long-term financial stability and infrastructure development.
As L&T navigates the evolving transportation landscape in Hyderabad, the company faces complex decisions regarding asset management and future investments. Balancing financial sustainability with societal impact remains paramount, underscoring the need for collaborative efforts between stakeholders to ensure the success of infrastructure projects and urban mobility initiatives.
