Telangana Govt approves ₹13,615 crore IRFC loan to takeover Hyderabad Metro from L&T

Hyderabad, India (Metro Rail Today): In a major policy shift aimed at reshaping urban transit governance, the Telangana Government has formally approved the acquisition of a 100% equity stake held by Larsen & Toubro (L&T) in L&T Metro Rail (Hyderabad) Limited (L&TMRHL), effectively paving the way for the Hyderabad Metro Rail Phase-I to transition into a fully state-owned entity.

The decision follows recommendations of a Cabinet Sub-Committee and was formalised through government orders issued recently. The move marks a significant turning point in India’s metro sector, where one of the largest Public-Private Partnership (PPP) metro projects is set to shift into public ownership.

₹13,615 Crore IRFC Loan to Finance Takeover

To fund the acquisition, the state has approved raising a loan of ₹13,615 crore from the Indian Railway Finance Corporation (IRFC), equivalent to the outstanding debt of the project as of April 30, 2026.

The government has also cleared:

• Execution of a Share Purchase Agreement (SPA)
• Provision of a State Government Guarantee
• Issuance of a Letter of Undertaking (LoU) to IRFC
• Signing of a tripartite agreement and direct debit mandate (RBI-compliant)
• Mobilisation of additional equity support through Hyderabad Metropolitan Development Authority (HMDA)

However, a key condition has been imposed: all clauses related to budgetary support have been removed from the IRFC term sheet, indicating a structured financial approach to limit fiscal exposure.

End of PPP Era for Hyderabad Metro Phase-I

The Hyderabad Metro Phase-I project, spanning 69.2 km, was originally developed under a PPP model by L&T, making it one of the world’s largest privately operated metro systems.

With this acquisition:

• The project will transition from private concessionaire control to state ownership
• Operational and financial control will shift to Hyderabad Metro Rail Limited (HMRL)
• The government will gain greater flexibility in fare policy, expansion, and integration planning

This move reflects a broader trend of re-evaluating PPP models in urban rail, particularly in cases where long-term financial sustainability and public service obligations require stronger government intervention.

Strategic Implications for Urban Mobility

The takeover is expected to have far-reaching implications:

1. Unified Governance

Bringing the metro under state control will enable better integration with future expansion corridors, multimodal transport, and urban planning initiatives.

2. Financial Restructuring

Refinancing through IRFC could potentially reduce borrowing costs and improve long-term viability of the project.

3. Policy Flexibility

The state can now align metro operations with public welfare goals, including fare rationalisation and last-mile connectivity improvements.

4. Replicability Across India

The Hyderabad model could serve as a precedent for other PPP-based metro systems facing financial or operational challenges.

The Managing Director of HMRL has been authorised to proceed with signing the Share Purchase Agreement after final approval from the Cabinet Sub-Committee. Subsequent steps will include financial closure, transition planning, and operational restructuring.

Commenting on the development, Mrs. Mamta Shah, MD & CEO, Urban Infra Group, said:

“The Hyderabad Metro transition from a PPP model to full state ownership is a defining moment for India’s urban transit sector. While PPPs have played a crucial role in accelerating metro development, evolving urban mobility needs demand flexible governance and sustainable financial structures. This move could set a new benchmark for balancing private participation with public accountability in large-scale infrastructure projects.”

The Telangana Government’s decision to take over Hyderabad Metro Phase-I signals a strategic recalibration of urban transport policy, prioritising long-term sustainability, operational control, and integrated mobility planning.

As Indian cities continue to expand their metro networks, this development could influence how future projects are structured—potentially redefining the balance between public ownership and private participation in the country’s urban transit ecosystem.