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  1. Hyderabad Metro: Here’s what the linchpin of project is

Hyderabad Metro: Here’s what the linchpin of project is

We have spent about R8,900 crore till March 31, 2016, which is 55% of the total cost. In 2011, we had achieved financial closure for R16,375 crore...

By: | Published: June 8, 2016 7:01 AM

Product delays, realignments, and right of way issues have delayed the Hyderabad Metro project by nearly 18 months. Being its single largest investment ever, a lot is riding for Larsen & Toubro on the project. VB Gadgil, the outgoing MD and CE of L&T Metro Rail (Hyderabad) Ltd tells BV Mahalakshmi the company is focussed on transit-oriented development (TOD) as commercial & retail space is projected to contribute 50% of the revenues, at least in the initial years. Excerpts:

How much investment have you made and what is the status on operationalising the project?

We have spent about R8,900 crore till March 31, 2016, which is 55% of the total cost. In 2011, we had achieved financial closure for R16,375 crore, which included R14,132 crore for the Metro system and R2,243 crore for the first phase of real estate development. The project was expected to be complete in five years from the appointed date of July 5, 2012. However, delays in approvals, land acquisition, and high interest costs have pushed the deadline to December 2018.

What was behind the cost escalation?

The reasons include general inflation in inputs, increase in interest costs, currency depreciation, delay in approvals and clearances, macro economics, delay in finalising the alignment, and right of way problems in prime areas.

How important is the retail and advertising component for you?

Retail is a key stream for our transit-oriented business branded as ‘Hyderabad Next’. Transit-oriented development (TOD) is expected to contribute about 50% of overall revenues, with the rest divided between ridership and advertising. The area of retail space would depend upon market demand and supply. The uniqueness of our station retail and advertising comes from the business model. We have developed each station as an independent centre offering retail, F&B, and quick service restaurants. Our advertising model seeks to provide better brand recall.

How many retailers do you have on board as of now?

In station retail, we have 2,38,000 sq ft of space, of which about 40% has been licensed. The Hyderabad Metro is probably the only metro project to have allotted retail spaces on all stations before commencement of operations. More than 40% of small retail formats have been leased out to brands which include names like Amul, Dominos, Subway, Organic 24. Around 70 of them are on board as of today.

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