L&T Quits Hyderabad Metro, Telangana Govt Steps in to Revamp Urban Transit

Larsen & Toubro (L&T), a leading infrastructure conglomerate, announced on September 26, 2025, that it expects to finalize the divestment of its 90% stake in the Hyderabad Metro Rail project by the end of the current financial year, FY26, according to a filing with the Bombay Stock Exchange. This strategic exit from the 70-km Phase-I, originally developed under a public-private partnership (PPP) model, follows an in-principle agreement with the Telangana government, which will assume full control by acquiring L&T’s equity in L&T Metro Rail (Hyderabad) Ltd for ₹2,000 crore and refinancing the project’s ₹13,000 crore debt.

The move comes as L&T grapples with operational losses and a shifting focus away from owning transit concessions, marking a pivotal restructuring for one of India’s most ambitious urban transport initiatives. The Hyderabad Metro, serving a city of over 10 million, has been a critical yet financially strained lifeline since its 2017 launch.

The agreement, finalized after months of negotiations, positions the Telangana government to steer the metro’s future, unburdened by the financial constraints that have hampered L&T. The state will take over the special purpose vehicle (SPV), L&T Metro Rail (Hyderabad) Ltd, absorbing a total financial commitment of approximately ₹15,000 crore. This includes settling a debt held by a 10-bank consortium led by the State Bank of India, a legacy of the project’s complex financing structure established in 2011 with the undivided Andhra Pradesh government.

L&T’s annual report highlights the project’s struggles, noting a 21% revenue drop to ₹1,108.54 crore in FY25 and a 13% rise in losses, driven by regulatory delays, inadequate state support, and external disruptions like the COVID-19 pandemic. These challenges, compounded by alignment changes and cost overruns, prompted L&T to signal its intent to divest last month, engaging both state and central authorities to facilitate the transfer.

L&T’s decision reflects a broader strategic realignment, as the company seeks to shed non-core assets and focus on high-margin engineering and construction projects. In a letter to the Ministry of Housing and Urban Affairs (MoHUA), L&T expressed frustration over the metro’s declining national ranking—from second to ninth in network length—and the lack of integration agreements critical for operational efficiency.

Despite overtures from Telangana Chief Minister A. Revanth Reddy to join Phase-II as an equity partner, L&T opted for a clean exit, citing unsustainable losses under the PPP model. The divestment not only alleviates L&T’s financial burden but also sets a precedent for reevaluating PPP frameworks in India’s urban infrastructure sector, where ambitious projects often face unpredictable fiscal challenges. Market sentiment echoed this relief, with L&T’s shares climbing 3.5% on the BSE following the announcement.

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For Telangana, acquiring the Hyderabad Metro heralds a transformative opportunity to enhance urban mobility and accelerate Phase-II, which envisions eight new lines spanning 163 km. This expansion aligns with the state’s vision to position Hyderabad as a global leader in public transport, addressing the needs of a rapidly urbanizing population. The state’s takeover enables greater flexibility in fare structures, operational improvements, and integration with other transit modes, though it must navigate complex debt restructuring and regulatory approvals to ensure long-term viability.

As Hyderabad prepares to rival metro networks like Delhi’s, this transition underscores the potential for state-led initiatives to reshape urban connectivity, while offering lessons for balancing private investment with public welfare in India’s infrastructure landscape.

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