Hyderabad: The government of Andhra Pradesh has cancelled the award of the Hyderabad Metro Rail project to a Maytas Infra Ltd-led consortium after it failed to raise adequate finances for the project.
The cancellation is a set-back for the infrastructure company which recently struck a deal with its lenders to restructure debt and which has been perceived unfavourably because it is promoted by the Raju family, whose head B. Ramalinga Raju confessed in early January to having cooked the books of Satyam Computer Services Ltd to the tune of at least Rs7,136 crore.
It is also a setback for the city which will now wait longer for a much-needed Metro.
Setback: A Maytas Infra construction site in Bangalore. The scrapping of the Rs12,312 crore Hyderabad Metro project deal comes a day after Maytas benefited from a move by the Karnataka government to reverse an earlier decision to scrap the award of a project to develop two airports in the state to the firm. Hemant Mishra / Mint
Anam Ramanarayana Reddy, Andhra Pradesh’s municipal administration and urban development minister, told reporters on Tuesday that while the Maytas Infra-led consortium had failed to achieve financial closure for the project even three months after the deadline, other consortia that had initially expressed interest in the project had not shown any willingness to take over.
The government-appointed chairman of Maytas Infra, K. Ramalingam, the former chairman of Airports Authority of India Ltd, refused comment on the state’s decision.
“We heard it (news of the deal being cancelled) through the media, have not received any official communication from the government so far,” the company’s spokesperson Tarun Udwala said.
Interestingly, the scrapping of the Metro deal comes a day after Maytas benefited from a decision of the Karnataka government to reverse an earlier decision to scrap the award of a project to develop two airports in the state to the firm.
The Rs12,312 crore project to build the Metro, billed as India’s first two-track elevated transit system, is one of the largest projects of its kind in the world and involves developing a 71.16km network at one go. It was to be completed five-and-a-half years from the date of award of the project.
The Maytas-led consortium had earlier also missed a deadline to provide a bank guarantee of Rs240 crore to the government by 17 March, and had sought an extension of six months from the original deadline of 17 March. It paid around Rs71 crore to the government in tranches after it was awarded the project on 8 August.
Other members of the consortium, in which Maytas owns 26%, are Hyderabad-based ferro alloys and power producer Nava Bharat Ventures Ltd (16%), infrastructure lending firm Infrastructure Leasing and Financial Services Ltd (IL&FS; 5%) and Thailand’s civil infrastructure firm Italian-Thai Development Public Co. Ltd (Ital Thai; 5%). The state government had planned to pick up 11% stake in the project and the remaining 37% was to be offered to financial partners.
The Maytas-led consortium had offered to pay around Rs30,311 crore to the government as revenue from the project over 35 years—one reason why it was awarded the project. Another factor that worked in its favour was its refusal to accept the financial assistance offered by the Union government to the tune of around Rs1,639 crore as viability gap funding.
The other four consortia initially shortlisted for the project were led by Essar Constructions Ltd (other members include SREI, Singapore MRT, SEC and STE of Singapore); a Nagarjuna Construction Co. Ltd-led one (Magna Allmore of Malyasia, Siemens of Germany and Emirates Trading Agency of Dubai); Reliance Energy and Canada’s Bombardier; and one led by the GVK group (Gammon, Alstom of France and IDFC Ltd).
The GVK-led consortium, however, had pulled out before the financial bidding stage citing its belief that the project was unviable.
Reddy said the government would not return the Rs71 crore paid by Maytas.
“A high-level review meeting under the chairmanship of the chief minister will meet on 13 July to decide on the future course of action, which includes calling for fresh global bids for the Metro rail project,” he added.
In a statement issued late Tuesday evening, Andhra Pradesh chief minister Y.S. Rajasekhara Reddy said the government’s priority would remain seeing the project implemented at the earliest because it would ease the traffic problems in Hyderabad and its environs.
Maytas Infra is promoted and headed by B. Teja Raju, the elder son of B. Ramalinga Raju.
Following the events at Satyam, which has since been sold to Tech Mahindra Ltd and rebranded Mahindra Satyam, Maytas ran into trouble.
First, the Karnataka government cancelled a Rs200 crore contract it had awarded the company to develop airports at Shimoga and Gulbarga. This was the decision that was rescinded on Monday after the Union government stood guarantee for these projects.
Then, Vedanta Resources Plc had cancelled a contract awarded to Maytas Infra citing slow progress. The contract was for building a township for staff at Vedanta group’s mining operations in Jharsuguda, Orissa, and was valued at Rs232.69 crore. And state-owned Power Grid Corp. of India Ltd also decided to revoke several rural electrification contracts it had awarded Maytas. The combined value of these contracts was 395 crore.
In early March, following a complaint by lenders to the infrastructure firm, the Company Law Board appointed its nominees on the board of Maytas Infra.
The company has since successfully negotiated with the lenders and obtained a debt restructuring package.