L&T Metro Rail Hyderabad is in talks with India Infrastructure Finance (IIFCL) to raise R1,000 crore through external commercial borrowings (ECB) route for the ongoing project and the deal is likely to close in couple of months.
“Dialogue is on with IIFCL. It has progressed quite well and raising a R1,000-crore loan should happen in a couple of months,” L&T Metro Rail (Hyderabad) CEO and MD VB Gadgil said on Friday. He said that there would be savings of 4-5% on the interest rates. The advantages of ECB is that one would get long term loans that range for 20-25 years, he said.
Further, the increase in raw material prices, including steel and cement, continue to remain a cause of concern for the Hyderabad Metro Rail project. Besides, labour costs and other inflated civil works are also adding pressure on the R16,375-crore project.
Hyderabad Metro project is one of world’s largest PPP projects in the metro sector. The Andhra Pradesh government signed the concession agreement with L&T Hyderabad Metro Rail, a special purpose vehicle, for development of this project under the design, build, finance, operate and transfer (DBFT) basis.
On rupee fluctuation, Gadgil said that there were no major impact as most of the orders were already placed and were paid in rupees. “However, a R700-crore signal and telecommunication equipment order may be impacted as other orders have already been placed,” he said.
He also ruled out any immediate cost overruns.
“We can assess the cost overrun while nearing the completion of the project,” he said. The 72-km project cost, which was estimated at R12,132 crore in 2008, had increased to R16,375 crore by 2011, when the project developer L&T achieved financial closure along with a 10-bank consortium led by SBI with R11,478 crore debt, meeting 70% of the total cost. Till date, the company has drawn R750 crore out of the R16,375 crore project.
Meanwhile, the project is also likely to attract both foreign and domestic equity partners on its board. “We are seeing a lot of attraction for this PPP project and hope to have few equity partners on board during the time of completion,” Gadgil added.
The first eight-kilometre Nagole-Mettuguda section of the Hyderabad Metro Rail will be opened for commuter traffic in March 2015.