Deal Structure and Settlement
As part of the one-time settlement, the government will pay ₹2,100 crore to L&T for its equity investment while also assuming responsibility for nearly ₹13,000 crore of project debt. According to officials, the transaction will be carried out in a phased and legally compliant manner to ensure a smooth transition of ownership from L&T Metro Rail Hyderabad (L&TMRH) to the state.
This decision follows extensive negotiations between Chief Minister A. Revanth Reddy, L&T Chairman & MD S.N. Subrahmanyan, and senior state and company officials. Initially, the Chief Minister invited L&T to participate as an equity partner in Phase 2, but the infrastructure giant declined, citing concerns over integration and operational viability.
L&T’s Exit and Government’s Gain
L&T expressed its inability to sign an integration pact between Phase 1 and the proposed Phase 2, citing challenges related to revenue sharing, seamless operations, and cost structures. Instead, the company opted to divest its entire stake, effectively handing over complete ownership of the 69-km network spread across three corridors.
During negotiations, L&T initially sought the government’s takeover of its ₹5,900 crore debt against equity, referring to a supplementary concession agreement signed in July 2022. Under this pact, the government still owes ₹2,100 crore out of a ₹3,000 crore interest-free loan. The final settlement balances these commitments, helping both parties move forward.
Clearing the Path for Phase 2
The Centre had earlier withheld approval for Hyderabad Metro Phase 2, citing concerns about integration since Phase 1 was privately operated while Phase 2 was proposed as a state-led project. It had insisted on a binding agreement with L&T to ensure unified operations. With the takeover now finalized, this obstacle has been removed.
The Telangana government has already submitted proposals for Phase 2A and 2B, covering eight new metro lines across 163 km. These extensions are designed to expand connectivity, ease traffic congestion, and strengthen Hyderabad’s position as a hub for urban mobility.
Officials Present at the Agreement
The discussions involved top officials from both the government and L&T. Key participants included Chief Secretary K. Ramakrishna Rao, Advisor (Urban Transport) N.V.S. Reddy, Finance Secretary Sandeep Kumar Sultania, MA&UD Secretary K. Ilambarithi, HMR MD Sarfaraz Ahmad, Principal Secretary to CM V. Seshadri, and Secretary to CM K. Manicka Raj. From L&T’s side, CMD Advisor D.K. Sen and L&TMRH MD & CEO K.V.B. Reddy were also present.
Why the Takeover Matters
The Hyderabad Metro, launched as India’s largest metro project under a PPP model, faced challenges due to high debt and limited ridership during initial years, particularly after the COVID-19 pandemic. With the state government’s takeover, officials believe the project can be restructured financially and strategically to maximize efficiency.
The move also signals a shift in urban infrastructure financing in India. State-led ownership could mean more flexibility in planning expansions, ensuring integration across networks, and aligning projects with public welfare goals.
Looking Ahead
The takeover marks a turning point in Hyderabad’s metro journey. With Phase 1 now under government control and Phase 2 awaiting central approval, the city is poised for a major boost in urban transport. Once executed, the expanded metro network will cover over 230 km, easing traffic, reducing pollution, and improving mobility for millions of commuters.
For Hyderabad residents, the transition may not bring immediate visible changes, but in the long run, it promises a more robust, unified, and reliable metro system.
