Hyderabad Metro Interest Burden May Halve After Refinance
HYDERABAD: The annual interest burden on the Hyderabad Metro Rail Phase-I project is expected to decline sharply after the Telangana government took over the project and refinanced existing loans with lower-interest borrowings.
According to financial disclosures, Hyderabad Metro had been paying around ₹940 crore annually as interest on loans raised earlier with guarantees from L&T Metro Rail Hyderabad. The burden is expected to fall to around ₹470 crore a year after the Indian Railway Finance Corporation (IRFC) extended fresh loans backed by a state government guarantee at an average interest rate of about 3.5 per cent.
Interest burden set to decline significantly
The reduction means the metro’s annual interest outgo could fall by nearly half. During the previous financial year, Hyderabad Metro reported revenue of about ₹1,010 crore.
The earlier borrowings included non-convertible debentures (NCDs), commercial papers and other debt instruments carrying interest rates ranging from around 6.58 per cent to 9.85 per cent.
Operating costs remain substantial
Metro operations, employee salaries and other expenditure together account for annual operating costs of around ₹500 crore.
While revenue exceeds operating expenditure, the heavy interest burden has continued to weigh on the project’s finances. Annual interest payments of up to ₹940 crore have pushed the metro into losses of several hundred crore rupees each year despite growing ridership and non-fare revenue streams.
Non-fare revenue seen as key
Officials and transport experts have stressed the need to increase passenger numbers and improve non-fare revenue. Several commercial spaces in metro stations and malls remain vacant.
Leasing these properties and implementing Transit-Oriented Development (TOD) projects could help improve revenue and move the metro towards profitability. However, questions remain over whether the government can effectively implement TOD projects or whether private-sector participation will be required.
The refinancing move is expected to provide immediate relief to Hyderabad Metro’s finances by substantially reducing debt-servicing costs.
