The loss-making enterprise, L&T’s single-biggest funding in a venture, has been struggling on account of price and time overruns, and lack of site visitors, made worse by lockdowns throughout the Covid pandemic.
The corporate has additionally been in talks with the Telangana authorities and lead banker SBI to financially stabilise the asset. Proceeds from the funding — anticipated by way of a convertible instrument — will assist pare the venture’s ₹13,500 crore debt and refinance it by extending mortgage tenors. One of many sources talked about above stated NIIF’s sponsors — sovereign wealth and pension funds — may additionally co-invest though there is no such thing as a agency dedication on that as but.
Spokespersons of NIIF declined to remark. L&T didn’t reply to ET’s queries.
Help from State
In parallel, the corporate has additionally sought a delicate mortgage of as much as ₹5,000 crore from Telangana, based on folks with information of the matter.
“The venture wants rapid money help from the federal government of Telangana to maintain operations. We have now requested the federal government for a long-term delicate mortgage which can be used just for decreasing the debt dimension,” Dip Kishore Sen, whole-time director and senior government vice chairman at L&T, informed ET.
He nevertheless declined to touch upon the quantum of the delicate mortgage.
Whereas it had turned down L&T’s requires monetary help earlier, the state authorities is alleged to be contemplating this proposal and has hinted that it might assist the corporate elevate the cash from different monetary establishments.
L&T was unable to invoke drive majeure because the operations have been solely shut for 169 days, as a substitute of the minimal 180 days required to invoke the clause. Individually, it additionally has a declare of round Rs 5,000 crore as a result of total delay in venture execution attributable to proper of means points and different approvals.
In June, the agency submitted an in depth monetary evaluation to chief minister Ok Chandrasekhar Rao whereas in search of help. As per estimates supplied then, the operator has been making a Rs 5 crore loss a day, on common, whereas its earnings are simply Rs 1 crore a day. Until date, collected losses have been about Rs 4,000 crore.
Sen added that L&T can be planning to cut back debt by infusing additional fairness by inducting extra traders. It’ll additionally ask the federal government to grant actual property mortgaging rights and full concession interval lease to facilitate transit-oriented growth (TOD) monetisation.
“The debt is so giant that we aren’t getting an encouraging response from traders with the present stage of debt. Nevertheless, lots of people are exhibiting curiosity within the venture contingent upon getting authorities’s money help funding and TOD monetisation,” he stated.
The entire asset worth of the venture is Rs 17,946 crore, of which Rs 2,439 crore is fairness, the remainder is debt. The corporate totally commissioned the venture in February 2020 however received hit by the pandemic. As towards every day passenger volumes of 700,000-800,000 to make the venture viable, it simply managed as much as 400,000 pre Covid earlier than lockdowns introduced the venture to a close to standstill, since then limping to 160,000 final month.
Price, Time Overruns
Initially a particular objective automobile (SPV), L&T Metro (Hyderabad Ltd) was first promoted by L&T Infrastructure Growth Tasks Ltd (L&T IDPL), which owned 99% of the venture’s fairness with guardian L&T proudly owning the remaining 1%. However in March 2017, L&T purchased out L&T IDPL to make it an entirely owned subsidiary.
With the loss-making Hyderabad Metro dragging down the general monetary efficiency of the guardian, analysts stated a complete monetary answer together with the potential monetisation of its energy unit may also help in important deleveraging.
“There was a sustained asset-light technique to derisk the stability sheet by means of a collection of divestments undertaken by the administration – from Dhamra port to electrical and automation enterprise to actual property amongst others,” stated an analyst. “However contemplating the cash invested and the mounting losses, onboarding an investor will ship the correct message to the market about intent.”
ET in its August 18 version reported that L&T had initiated an exit from its 51% holding in L&T Infrastructure Growth Tasks (L&T IDPL). It has bought a 99 MW hydropower unit to ReNew Energy for Rs 985 crore.
Previously, the group thought of strategic choices for the metro venture, together with a possible InVIT, however none of those materialised.
“Over the two-year interval of FY22 and FY23, we estimate money shortfall funding of Rs 2,000 crore in direction of the venture,” stated Nilesh Bhaiya, institutional analysis analyst at Motilal Oswal Monetary Companies Ltd. “L&T has already earmarked that sum as funding help to the venture of which it has utilised Rs 500 crore in 1QFY22. Due to the sale of E&A enterprise, the corporate has sufficient money to maintain money shortfall within the venture. Ultimately, the corporate plans to monetise its stake in Hyderabad Metro by means of a strategic accomplice or means of InvIT.”