The Indian Railway Finance Corporation (IRFC) on Monday said that it has signed a Rs 13,527-crore refinancing agreement for the Hyderabad Metro Rail which is expected to substantially reduce the metro’s debt servicing obligations, and improve financial situation of the project. The refinancing deal, signed between IRFC and L&T Metro Rail (Hyderabad), is set to turn the project profitable in about 1 year as the overall borrowing cost will come down significantly from about 10.5% currently to about 7%.
Transition to State Ownership
The transaction include the transfer of 100% ownership of the Hyderabad Metro project from L&T to the Telangana government at a total cost of around Rs 1,400 crore. Telangana’s chief secretary K. Ramakrishna Rao said that the metro system was already operationally profitable but had been posting losses due to the “expensive” debt accumulated under the public-private partnership (PPP) structure.
“This is a mature asset. Operationally it’s already profitable. So, the debt is what is really holding it back. Once the project comes back to the government, we will be able to monetise the real estate far more quickly,” Rao said.
Structured over a 20-year tenure with quarterly repayments, the refinancing replaces higher-cost debt with competitively priced long-term rupee financing. The facility carries no processing fees, commitment charges or prepayment penalties, making it an efficient and borrower-friendly refinancing mechanism.
“This transaction demonstrates that large-scale urban infrastructure can be financed domestically through efficient, long-tenor funding structures aligned to project cash flows,” said IRFC CMD & CEO Manoj Kumar Dubey.
IRFC officials said that the transaction will be funded through a mix of instruments, including external commercial borrowing (ECB), bonds and, rupee-denominated loans. “The lending rate is going to be dynamic because the value of the transaction is significant. We will be using the cost-plus model for financing this transaction,” an official told FE.
Last week, the state-run lender raised an a JPY-equivalent $1.1 billion ECB loan through a consortium of banks such as State Bank of India, HDFC Bank, Sumitomo Mitsui Banking Corporation and DBS Bank. The company has indicated that it plans to raise $2 billion through ECB in FY27, primarily in Japanese yen, to fund projects having forward and backward linkages with the railways.
Funding Mechanisms
For IRFC, the Hyderabad Metro transaction marks its formal entry into urban metro financing. The company said it is now open to funding more metro projects across India using similar low-cost financing structures.
The Telangana government said refinancing was strategically important not only for lowering finance costs but also for accelerating Hyderabad Metro’s future expansion. The existing 69.2-km metro network spans three corridors and 57 stations, but the state plans to add another 162 km in future phases.
Rao said three of the seven high-speed rail corridors announced by the government in the last union Budget are expected to terminate in Hyderabad. This includes Hyderabad-Pune, Hyderabad-Bengaluru and Hyderabad-Chennai corridors.
“We have a large number of international companies establishing their GCCs in Hyderabad. The city is known to be a pharma hub and vaccine capital. In IT, we are just behind Bangalore. All of this required a mass transit system, we are expanding the metro network further. The state government is in discussions with National High Speed Rail Corporation (NHSRCL) to develop a large integrated transport hub in Hyderabad that will connect bullet trains, metro rail, buses and Regional Rapid Transit System (RRTS) system,” he said.