Hyderabad Metro Buyout Faces Fresh Funding Challenge
HYDERABAD: Telangana is exploring funding routes through Gujarat’s GIFT City to finance the proposed acquisition of the existing Hyderabad Metro Phase I network from Larsen & Toubro, after a planned loan from the Indian Railway Finance Corporation was stalled. The financing question has become central to the State’s broader plans to expand the metro system and establish a unified network.
The State has engaged SBI Capital Markets to identify funding for the proposed acquisition of the 69.2-km Phase I network. The borrowing requirement was earlier estimated at about ₹13,500 crore, with the proposed IRFC financing halted in May over questions surrounding the corporation’s mandate for refinancing existing assets. GIFT City is now being examined as an alternative because its financial framework permits refinancing of existing infrastructure through foreign-currency borrowing. However, whether such a structure would require additional approvals from the Union government before funds can be released remains unresolved. The Hyderabad Metro funding challenge comes at a critical point for the city’s public transport network. Telangana is simultaneously preparing for a proposed 122.9-km Phase II expansion, estimated to cost ₹38,595 crore. The State and Centre have been working towards a 50:50 joint venture structure that could bring the existing and proposed networks under a common entity.
A fresh valuation of the existing Phase I assets is also part of the process. Earlier financial and technical assessments had been used to determine the State’s equity contribution to the acquisition and the borrowing requirement. SBI Capital Markets is expected to examine the valuation again, potentially influencing the financial structure of the proposed transaction. Meanwhile, preparations for Phase II are continuing. The State has been pursuing departmental clearances, while work has begun towards appointing a General Consultant for several proposed corridors. Procurement plans for additional metro coaches for the existing network are also being explored. The financial structure matters because metro expansion requires long-term capital as well as sustained operating support. A borrowing model that places excessive pressure on public finances could constrain future transport investment, while a carefully structured acquisition could create greater flexibility for network integration.
For Hyderabad, the stakes extend beyond ownership of existing assets. Metro expansion is increasingly important as road congestion, commuting distances and development density rise across the metropolitan region. A larger public transport network can support more compact growth and reduce dependence on private vehicles, provided stations are connected effectively to buses, walking routes and other modes. The Hyderabad Metro funding decision will therefore influence both the pace and structure of future expansion. Before the proposed acquisition moves forward, questions around valuation, borrowing terms, regulatory approvals and the Centre-State framework will need to be resolved. The immediate priority is a financially sustainable arrangement that allows Hyderabad to expand public transport without compromising long-term fiscal capacity or delaying the delivery of much-needed connectivity.
