L&T set to bag Rs 12,132-cr Hyderabad metro rail project

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Pips Transtroy, Reliance Infra by seeking lowest viability gap funding.

Our Bureau

Hyderabad, July 14

Construction major L&T is all set to bag the mandate to develop the Rs12,132-crore Hyderabad Metro Rail Project Ltd (HMRL), by virtue of seeking the lowest viability gap funding (VGF) support of Rs 1,458 crore.

L&T's bid emerged the lowest among the financial bids of six consortia, which were opened on Wednesday at the HMRL office here.

The Transtroy-OJSC-CR 18G-BEML and Reliance Infra (ADAG) Group were placed second and third, respectively.

Lanco Infratech, Essar and Soma-Strabag AG (Austria) were the others in the fray with their consortium partners.

While L&T sought Rs.1,458 crore as VGF, Transtroy sought Rs.2,200 crore and Reliance Infra Rs. 2,991 crore.

To engage partner

Going by the arrangement, L&T will engage operations and maintenance partners for the project. Mr Y. M. Deosthalee, Chief Financial Officer, L&T, said that this is the largest order the company has ever bagged. “The financial closure of the project will take at least six months. We need to structure a model. We need to talk to the lenders.” he said. At least 70 per cent of the cost has to be met through debt. The project is expected to be completed in five years, said another company official.

The Andhra Pradesh Government appointed a three-member panel comprising the HMRL Managing Director, Mr N.V.S. Reddy, the Managing Director of Hyderabad Metro Water Board, and the State Finance Secretary, that with the help of technical, financial and legal consultants will scrutinise place the bid with the Government for formal approval.

According to sources, the Cabinet approval would be through before month-end and the developer chosen would be given time till December to achieve financial closure. The Government and HMRL are keen to initiate work on the project by January 2011, since the project ran into a controversy surrounding the award of the contract to a Maytas Infra-led consortia and subsequent cancellation.

The Andhra Pradesh Government cancelled the contract awarded to the Maytas Infra-led consortium as it failed to achieve financial closure in spite of extension of time. Maytas won the contract as it refused VGF support and instead assured financial returns to the Government. This had raised doubts and questions from experts, including Mr E. Sridharan of Delhi Metro. The Maytas plan was based on commercial exploitation of land along the metro network.

The cancellation necessitated a fresh bidding process in which eight consortia were shortlisted. Of the eight, two consortia, of GVK and GMR, backed out during the financial bidding stage.

While the project cost remains the same, the contribution from the Government comes down with L&T seeking lower VGF against the Centre's decision to extend up to Rs 2,363 crore as VGF, which works out to 20 per cent of the project cost. The State Government is expected to contribute another 20 per cent and the rest will be from the promoter consortium.

Related Stories:
L&T bags two Chennai Metro Rail tenders
L&T gets orders worth Rs 747 cr
L&T bags Rs 1,450-cr road project

(This article was published in the Business Line print edition dated July 15, 2010)
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