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Business News/ Companies / News/  L&T plans to finalize vendors for Metro rail project by Feb-end
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L&T plans to finalize vendors for Metro rail project by Feb-end

Firm says it is in the process of finalizing the `180-200 cr contract to supply automated fare collection units within a week

L&T has so far invested around `850 crore on the Hyderabad Metro rail project. Photo: AFP (AFP)Premium
L&T has so far invested around `850 crore on the Hyderabad Metro rail project. Photo: AFP
(AFP)

Hyderabad: India’s biggest engineering company Larsen and Toubro Ltd (L&T) said on Tuesday that it plans to complete the process of signing up vendors for the 16,375 crore Hyderabad Metro rail project by the end of February.

L&T placed orders worth 1,700 crore with South Korea’s Hyundai Rotem Co. for rolling stock in September, and orders worth 700 crore with France-based Thales SA to set up signalling, train control and communication systems in November. The company said it is in the process of finalizing the 180-200 crore contract to supply automated fare collection units within a week, followed by escalator and workshop equipment by February.

L&T is developing the Hyderabad Metro rail project, the biggest urban infrastructure project undertaken as a public-private partnership in India. The elevated rail network will cover 71.16km along three corridors comprising 66 stations.

The company has so far invested around 850 crore on the project, largely met through a short term loan of 600 crore from Yes Bank Ltd at an interest rate of 11%. L&T will make the first drawdown of its debt component this month. This will be in the range of 300-500 crore.

L&T is investing around 4,330 crore as equity—the single-biggest investment so far on any project the firm has executed. The debt component is 10,478 crore. The Union government has provided a 1,458 crore grant as viability gap funding.

The debt was funded by a group of 10 banks with State Bank of India as the lead banker in March 2011 at a floating rate of interest, starting at 10.5%. Since then the interest rate has risen 175 basis points, putting the viability of the project under a cloud. One basis point is equal to one-hundredth of a percentage point.

“Last two years were abnormal, we are hoping interest rates to soften a bit this year," said V.B. Gadgil, managing director, L&T Metro Rail (Hyderabad) Ltd.

L&T has initiated several measures to contain the interest burden.

It’s in talks with India Infrastructure Finance Co. Ltd (IIFCL) to replace some of its existing debt to the tune of 1,000 crore with cheaper and longer tenure loans.

“We are in discussions with IIFCL," said Gadgil, refusing to disclose more details.

To insulate itself from exchange-rate fluctuations, L&T’s largest order worth 1,700 crore to South Korea’s Hyundai Rotem for rolling stock is denominated in rupees.

“The company is also negotiating with other vendors to sign up in rupee terms," said an official of L&T Metro Rail.

Gadgil said L&T is planning to start first trials by the end of 2014. The project is expected to be completed in five years.

The network is to be constructed in five years, with L&T holding the concession for 35 years, extendable by another 25. The company can earn lease rentals from property development and advertising rights before the real estate is returned to the state government.

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Published: 08 Jan 2013, 11:47 PM IST
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