L&T Metro Hyderabad to raise Rs 13,600 cr in debt to cut funding cost

L&T Metro Rail that runs metro trains in Hyderabad is raising up to Rs 13,600 crore through bonds and commercial papers, in one of the largest local debt fundraisings in the infrastructure space this year, three people familiar with the matter said.

The loss-making company aims to reduce its funding cost by at least 200 basis points by replacing high-cost bank loans with the new debt, they said.

It aims to sell non-convertible debentures (NCDs) up to Rs 8,600 crore with maturities up to five years, and commercial papers up to Rs 5,000 crore in tranches spread across maturities up to one year, sources said.


SBI Capital Market is primarily helping L&T Metro Rail (Hyderabad) sell the bonds and commercial papers, they said.

The company did not comment on the matter. The NCDs will likely have corporate guarantee from Larsen and Toubro (L&T) and may offer 6.30-6.60% annual returns, people cited above said.

Those should be rated AAA (CE) by rating company Crisil that has already provided such a provisional rating about two weeks ago. Final rating is expected anytime soon.

Credit enhancement, or CE, is an additional comfort for lenders/investors for timely repayments. About two weeks ago, rating company Crisil already provided such a provisional rating.

“Those proposed CPs too will have a letter of comfort from L&T,” one of the sources told ET.
CPs are expected to be priced in the range of 5-5.30%.

The borrower is reaching out to a group of investors including mutual funds, banks, insurers and corporate treasuries, the sources said.

L&T Metro Rail, a subsidiary of L&T, was set up to enter into a concession agreement with the Telangana government to execute the project on DBFOT (design-build-finance-operate-transfer) basis for a term of 35 years. The total length of the stretch is 69.2 km spread over three corridors.

“The project ran into time and cost overruns owing to delay in getting right of way,” Crisil said in a report. The rating on NCDs reflects the unconditional, irrevocable, and continuing guarantee from L&T and strong payment mechanism, it said.

L&T Metro Rail achieved partial commercial operation date (COD) in November 2017 on completion of two corridors and full COD was achieved in February 2020 on completion of the third corridor.

The company had taken a loan from a group of banks including State Bank of India, Canara Bank, Standard Chartered Bank, and Indian Bank. The loan on an average was charging over 8.50% a year, a market insider said.


SBI Capital and individual banks could not be contacted immediately.

Dealers said the company seems to be expecting cash inflows within a year, which could be a key reason for issuing CPs.


The Telangana government may announce a bailout plan for L&T Metro Rail (Hyderabad), which has been seeking financial aid citing huge losses it suffered due to the Covid-19 pandemic.


As of March 31, the company's losses widened to about Rs 1,767 crore from Rs 382 crore a year ago. Its metro services were interrupted due to low ridership as well as fall in footfalls amid the pandemic.