On the free bus ride scheme; ridership of the metro has become "less interesting" Raman CFO L&T

Construction giant Larsen & Toubro (L&T) is considering divesting its stake in the Hyderabad Metro project following a decline in ridership attributed to the Telangana government's initiative offering free bus rides for women, revealed R Shankar Raman, the company's whole-time director and chief financial officer.

L&T currently holds a significant 90 percent stake in the metro venture, with the remaining 10 percent owned by the state government. The daily passenger count, which peaked at 550,000 in November 2023, has dwindled to 480,000. Concerns over the project's financial viability have prompted L&T to contemplate asset monetization post-FY26 as part of its non-core business strategies.

The initiation of the free bus ride scheme by the Congress-led government in December 2023 has notably impacted metro ridership dynamics. Raman highlighted a notable gender disparity in public transport usage, with women increasingly favoring buses over the metro, consequently leading to a shift in male commuters towards metro services.

Raman expressed optimism regarding a potential resurgence in ridership, citing expectations that the stricter return-to-office mandates within the IT sector would encourage more employees to utilize metro services. However, L&T intends to temporarily scale back its divestment plans in the fiscal year 2024-25, focusing instead on debt restructuring and bolstering ridership figures.

The company is also exploring avenues to monetize the real estate assets associated with the metro project. Despite a 65-year concession to operate the system and receiving a soft loan of Rs 3,000 crore from the state government, L&T faces a substantial debt burden of Rs 13,000 crore in addition to Rs 2,000 crore in losses over recent years. The company aims to reduce its debt load to Rs 8,000 crore.

L&T initially secured the Hyderabad Metro project in 2010 and completed it in 2020, with a total investment of Rs 20,000 crore. Despite these challenges, the company reported a consolidated net profit of Rs 4,396 crore for the quarter ending March 2024, marking a 10 percent increase compared to the same period last year.