Larsen & Toubro (L&T) has formally expressed its intent to divest over 90% of its stake in the L&T Hyderabad Metro Rail project, proposing a handover to the Telangana or central government via a new Special Purpose Vehicle (SPV). In a letter dated last month to the Ministry of Housing and Urban Affairs (MoHUA), L&T cited persistent operational hurdles, regulatory delays, and escalating financial losses as key reasons for the move. The company, which holds a 35-year concession for the 72 km Phase I network, emphasised that despite repeated appeals, the state government has withheld promised financial aid, exacerbating the crisis.

The Hyderabad Metro, the world's largest public-private partnership (PPP) in urban rail, was awarded to L&T in 2010 by the undivided Andhra Pradesh government, with financial closure achieved in 2011 through a consortium led by the State Bank of India. Construction faced significant delays due to land acquisition issues, alignment changes, utility shifts, and right-of-way disputes, leading to cost overruns. L&T submitted claims totalling Rs 3,756 crore in March 2017, which ballooned to Rs 5,000 crore by the project's partial commissioning in 2017 and full operations in February 2020. The COVID-19 pandemic further compounded woes, enforcing a 169-day shutdown and reducing ridership through shifts to remote work.

Financial strain persists, with L&T Metro Rail's FY 2024-25 revenue from operations dropping 21% to Rs 1,108.54 crore from Rs 1,399.31 crore the prior year, while pre- and post-tax losses widened 13% to Rs 625.88 crore. Accumulated losses now exceed Rs 6,000 crore, burdened by a Rs 13,000 crore debt. Despite a 25% ridership surge to record levels in 2025, initiatives like the state government's free bus scheme have diverted passengers, dropping daily footfall from a peak of 550,000 to 480,000. L&T also flagged risks from Phase II expansions, including shared tracks and stations that could strain infrastructure and finances under dual administrations.

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The firm has declined to join as a PPP partner in Chief Minister Revanth Reddy's Phase II A and B elevated corridor projects, urging the government to assume control post-2026 to avoid "future trouble". While an Rs 3,000 crore soft loan was provided earlier, L&T's exit proposal aims to stabilise the network, which integrates with MMTS railways and bus stations for seamless urban mobility. Telangana officials have yet to respond publicly, but the development signals a potential shift toward greater state involvement in the Rs 19,000 crore project, highlighting PPP pitfalls in India's metro expansions.

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