Outlook on bank facilities of L&T Metro Rail (Hyderabad) revised to negative

New Delhi: The outlook on bank facilities of L&T Metro Rail (Hyderabad) Limited (L&TMRHL) has been revised to negative by India Ratings and Research (Ind-Ra) but the rating has been affirmed as ‘IND BBB+’. 

There have been significant delay in revenue realization from the monetization exercise of the transit-oriented development (TOD) in this current lockdown and that will impact the final ridership figues in fiscal 2020-21. This has led to the outlook revision by Ind-Ra.

The project has seen delay in monetization of 1.28 million sq ft TOD which was slated to have happened in fiscal 2019-20 as per the original estimate of the management of the project. The management claims that the current corona pandemic has stalled the proceedings of the monetization which were at final stages of closure.

Although L&T extended its support to the metro rail project and infact has increased its support in the operations phase to Rs 1,218 crore in 2020, the outlook has still been reivsd. The addtitonal support by L&T is due to the more debt tied up to finance the cost over-run of the metro rail project and also meet the shortcoming in debt servicing.

The current corona virus led lockdown and delay in real estate monetization process is going to put additional pressure on the cash flows of the project. This would result in increased pressure on sponsors of the project including L&T. However, Ind-Ra expects the sponsors to support the project financially. 

But in Ind-Ra’s assessment, the ridership projections for the Hyderabad Metro project and its revenue risks are exiting. The new Hitec city-Raidurg stretch of 1.34 kilometers has resulted in additional ridership of 3 lakh and the metro rail project’s long term economic rationale is considered to be intact.