HYDERABAD METRO

RAIL CASE STUDY

GOHIL DHIREN
K SANDEEP REDDY
BACKDROP

• Greater Hyderabad is a mega city that covers 625 sq. km. of municipal
corporation area and 6,852 sq. km. of metropolitan area.
• It is fast emerging as the hub of IT/ITES, Biotech, Pharma and Tourism sectors.
• Its strategic geographical location, multilingual and cosmopolitan culture,
tremendous growth potential and investment-friendly economic policy are all
making it an attractive destination for corporates, entrepreneurs
NEED

• Its population stands at 10 million+ (2014) and is projected to touch 13.6

million by 2021.
• Currently, over 5 million personalized vehicles ply on Hyderabad roads, with
an addition of 0.50 million vehicles every year.
• 8 million motorized trips are made every day, of which, only about 3.2 million
or 40% are made by the Public Transportation System (PTS) i.e. buses and
local trains. That means the rest of the trips are made by personal vehicles
leading to traffic bottlenecks, high pollution levels and a steep increase in fuel
consumption.
NEED CONTD.

• A people-friendly city is that which provides a good quality of life. An efficient,

safe, reliable and comfortable public transportation system is one of the pre-
requisites of good living.
• The increasing pressure of the burgeoning population is putting Hyderabad's
Transportation System under constant pressure. The need of the hour is a
robust system that is dependable, comfortable, affordable and sustainable.
SOLUTION

• Mass Rapid Transit System (MRTS)

• Accordingly, the development of Metro Rail was approved for 72 km.,
covering three high density traffic corridors of Hyderabad.
• The Project is being developed on DBFOT(Design, Build, Finance, Operate and
Transfer) basis in PPP mode.
• L&T will receive real estate construction rights over 18.5 million square feet,
in addition to ticket sales revenue.
OTHER BIDDERS
• Lanco-OHL (Spain)
• Reliance (Anil Dhirubhai Ambani group)
• Essar-Leighton (Australia)-Gayatri-VNR consortium
• GVK-Samsung consortium
• GMR
• Transstroy-OJSC (Russia)-CR 18 9 (China)-BEML consortium
• Soma-Strabag (Austria)
• Maytas Infra of Ramalinga Raju
SUB-CONTRACT

• Operating & maintaining contractor = Keolis SA, a subsidiary of France-based

SNCF Group
• Rolling stock contractor = Hyundai Rotem
RAIL CORRIDOR

• 45 minutes for Corridor 1 (Miyapur-L.B. Nagar - 29 KM) as against 1 hr 44

minutes by road.
• 22 minutes for Corridor 2 (Jubilee Bus Station-Falaknuma - 15 Km) as against 1
hr 10 minutes by road.
• 39 minutes for Corridor 3 (Nagole-Shilparamam - 28 KM) as against 1 hr 26
minutes by road.
BUDGET

• A budget is an estimation of revenue and expenses over a specified future

period of time and is usually compiled and re-evaluated on a periodic basis.
• Budgets can be made for a person, a family, a group of people, a business, a
government, a country, a multinational organization or just about anything
else that makes and spends money.
• Surplus budget
• Balanced budget
• Deficit budget
• Static budget vs flexible budget
PROJECT DETAILS

• L&T MRHL, a special purpose vehicle (SPV), was incorporated to undertake

the implementation of the Hyderabad Metro Rail Project.
• DBFOT (Design, built, finance, operate, transfer)
• Operating period of concession = 35 years (option of extension for another 25
years)
• Original project contract = 12132 crores
• Total project cost = 16,375 crores (2018) PROJECT ESCALATION
 PROJECT ESCALATION

Timeline Total Project Cost *Cr

2012 12132

2017 14700

2018 16375

2020 18000
 PROJECT BREAK-UP

Particulars Cost *Cr Total Project Cost

Promoter Equity 2439 15%
Unsecured Loans 1000 6%
VGF (viability gap funding) 1458 9%
Term loans 11478 70%
Total 16375 100%
REVENUE MODEL

Particulars % of Revenue
Passenger fares 50%
Property development 45%
Advertisements 5%
Total Revenue 100%
CURRENT FINANCIAL CONDITION

Source = ICRA Ratings

IMPLICATIONS

• 5000 engineers & 45000 ( skilled & unskilled workers) Employment

• Road expansion, shifting the utilities including the sewer & water pipelines
(Issues)
• Larger contentious issue is the claim of the cost escalation.
• The metro project was earlier designed with a capacity of 40,000 passengers
per hour in peak direction. Capacity was scaled up to 60,000 passengers per
hour considering the increasing density of population.
• Green & Eco-friendly mode of travel - reduces carbon emission, fuel
consumption and pollution.
IMPLICATIONS CONTD.

• Viability of the project is under question (Projected project return of 0.5% vs

required return of 15%)
• 1300 crores/annual interest burden
• Developed only 1.2 million sq. ft so far as against eligible 18.5 million sq. ft
• Metros all over the world lose money and are heavily subsidized by
governments
• There are around 200 Metro projects in the world, and no Metro makes profit
• HMRL adopted business models of Hongkong, Tokyo, Singapore & Taipei
THANK YOU