Hyderabad metro fare hike positive for L&T: CLSA

Mumbai: CLSA has said the 150 per cent increase in fares by Larsen & Toubro’s Hyderabad Metro project, which started service on Tuesday, will reduce start-up losses.

“This fare hike will more-than compensate for a 15 per cent rise in its Capex and could reduce start-up losses by 23-30 per cent, which was the biggest fear for the market,” said CLSA, which has a ‘buy’ rating on L&T.

The fare hike and the improving Hyderabad realty market crystallises a $ 458 million value for the conglomerate’s metro subsidiary, the brokerage said.

“LHM’s execution has been excellent on build-quality, linkages with other modes of transport and eventual state support. From the real estate point of view, the metro could push up rentals and capital values along its corridors,” said CLSA. L&T shares, which ended 0.8 per cent lower at ?1212 on Tuesday, have gained 35 per cent so far in 2017.