Hyderabad Metro Rail Project

A study on the PPP mode project structure

Presented by: Karthik Girish and Ishita Saraswat

1. Introduction Aim of the presentation
The aim of the study is to understand the the basic structure of a PPP project with respect to
the asset class of Metro Rail Systems.
2. Scope of
Project
What is the Hyderabad Metro Rail project?
3. Risks 1. The project is the world’s largest
Metro Rail project being executed in
PPP mode.
4. PPP model 2. The Project is being executed in Public
and share Private Partnership (PPP) mode on
Design, Build, Finance, Operate and
Transfer (DBFOT) basis.
5. Financial 3. The total cost of the metro project was
Arrangement Rs. 14,132 crore (USD 2.36 bn).

Sector State and year signed Public and Pvt. Entity Concession Period
6. Shares of
Responsibility Urban Infrastructure -
July 2010 - rebidding
Govt. of Telangana and L&T Metro
(Initially in Jul 2008 which was Rail Hyderabad Ltd.
35 years
Mass Rapid Transport
cancelled in Mar 2009) (Initially GoAP and Maytas Infra.)

7. Current Status
Source: DEA, M. (2010). Public Private Partnership Projects in India-Compendium of Case Studies. 2
1. Introduction Project Timeline
2. Scope of 2007 2018
Project 2013

3. Risks 2010
2019
2015
4. PPP model
and share

2011
2016
5. Financial
Arrangement

2012 2017
6. Shares of
Responsibility

7. Current Status
Source: DEA, M. (2010). Public Private Partnership Projects in India-Compendium of Case Studies. 3
1. Introduction Scope of the project
The outputs of the project are given below as per the works awarded
to each private entity.
2. Scope of
Project
Authority : Hyderabad Metro Rail Limited (GoT)

Concessionaire : L&TMRHL
3. Risks
• Independent Engineer : Louis Berger, USA
• Safety Consultant : Eptisa, Spain The central authority is
HMRL (consisting of
4. PPP model Concessionaire’s Engineer(CE) the Govt. of AP and
and share L&T) and the remaining
Programme Manager
companies are
Lenders’ Engineer
managed directly by
5. Financial L&T (HMRL).
Arrangement Independent Safety and RAM Assessor

Consultants for Carbon Credits

6. Shares of
Responsibility Lenders Insurance Consultant-Marsh India Pvt. Ltd.

Operation & Maintenance Contractor

7. Current Status
Source: Owens, M. G., & Reddy, N. V. S. (2016). Hyderabad metro rail: A renaissance of Urban rail. 4
1. Introduction Scope of the project Project Owner
The outputs of the project are given below as per the works awarded
to each private entity.
2. Scope of
Project
Output Description Company responsible

3. Risks Viaducts construction

Creation of a 71.16 km long viaduct. There
will be 64 metro stations, with TOD around
Stations and Real Estate Dev.
the stations. Also, P ways, traction, and
P Way and Electrical substations are constructed.

4. PPP model Civil works and service provider for operating

Depots
& maintaining the Hyderabad metro train
and share
O&M services.

Signalling
Signalling and communication systems for
the metro stations.

5. Financial Train Control

Arrangement Telecom
Smart card-based Automatic ticketing & gate
systems for passenger convenience and
Automatic Fare Collection seamless travel – supplied by Samsung,
6. Shares of South Korea.

Responsibility Coaches will be air-conditioned with

automatic door-closures and many other
Rolling Stock safety features – user friendly coaches

7. Current Status
Source: Owens, M. G., & Reddy, N. V. S. (2016). Hyderabad metro rail: A renaissance of Urban rail. 5
1. Introduction Risks
The risk allocation framework is given below:
Risk Type Sensitivity Risk Period Primary Risk Bearer
2. Scope of
Pre-operative Risks
Project Risk allocation among entities
Land Acquisition Delays High 0-5 years Government
Financing Risks Medium 0-5 years Private Operator
Planning Medium 0-5 years Private Operator
3. Risks Regulatory & Approval Delays
Construction Phase Risks
Low 0-5 years Private Operator
11.8%
Design Risk Medium 0-5 years Private Operator

17.6%
Construction Risk Medium 0-5 years Private Operator
4. PPP model Change in Scope Risk Low 0-5 years Government
and share Financing Risk Medium 0-5 years Private Operator
Operational Phase Risks
Technology Risk Low 0-35 years Pvt. Operator / Govt.

5. Financial
Operations and Maintenance Risk Medium 0-35 years Private Operator 70.6%
Market Risk High 0-30 years Pvt. Operator / Govt.
Arrangement Performance Risk High 0-30 years Private Operator
Handover Risks
Handover Risk Low 35th year Private Operator

6. Shares of Private Operator Event of Default Low 0-35 years Private Operator
Private Operator
GoAP Event of Default Low 0-35 years Government
Responsibility Government
Other Risks
Force Majeure Low Throughout Private Operator Pvt. Operator / Govt.
Hang in Law Risk Low Throughout Private Operator
7. Current Status
Source: DEA, M. (2010). Public Private Partnership Projects in India-Compendium of Case Studies. 6
1. Introduction PPP model and share
The project is being executed in Public Private Partnership (PPP) mode on design, build,
2. Scope of finance, operate and transfer (DBFOT) basis.
Project Additional Rs.1,980 Cr. being spent
Of the total cost of Rs. 14,132 by GoAP for land acquisition, shifting
crore (USD 2.36 bn), Government
of India has sanctioned Rs.
of utilities, R&R, pedestrian facilities,
1,458 crore (USD 0.24 bn) (10%) etc.
3. Risks as one time capital grant on the
basis of competitive bidding.
Concession Period (CP) 35 yrs
(including 5 years for construction),
extendable by another 25 yrs.
4. PPP model
10%
and share 269 acres of land for 3 Depots and
The remaining Rs. 12,674 crore P&C areas at 25 stations.
(USD 2.12 bn) (90%) is being
invested by the Concessionaire M/s
L&T Metro Rail Hyderabad Ltd., a Scope for property development
5. Financial special purpose company of the through use of air space – properties
Arrangement Indian Infrastructure and
cannot be sold.
Manufacturing giant L&T.

90% Lease rentals during CP to cross

6. Shares of subsidise losses.
Responsibility
L&T Metro Rail Hyderabad Ltd. Property + Rail system to revert to
Government of India Govt. at the end of CP.

7. Current Status
Source: http://railanalysis.in/articles/hyderabad-metro-rail-project-overview/ 7
1. Introduction Financial Arrangement
The concession agreement, income-expenditure of the project are given below
2. Scope of Day from day zero Total money to be spent
1. Define concession agreement
Project Project milestone 1 180 5
2. Upto 20% of performance security Project milestone 2 365 15
Project milestone 3 730 30
to be deducted for delays or Project milestone 4 1100 50

3. Risks damages by LnT Project milestone 5

Schedule completion
1500
1826
75

3. Performance security is 20% of date

total cost of the project

Year 2018-2019 Financial Status of L&T Hyd. Metro
Income
4. PPP model 4. 10% for real estate development Percent Actuals
and share by LnT Revenue from Operations 4.43 626578342
Construction Contact Revenue 95.09 13460528715
5. Grant by government disbursed
Other Income 0.49 68691251
under equity and remaining under Total Income 100.00 14155798308
5. Financial
O&M Expenses
Arrangement Construction Contract Expenses 91.32 13460528715
6. Operate under escrow account
Operating Expenses 2.79 410660612
7. Property tax paid by the Employee Benefit Expenses 0.34 50680056
6. Shares of government as it is the owner Administration 0.98 144676858
8. Subletting not allowed Finance Cost 3.43 505866760
Responsibility
Depreciation 1.13 166985670
9. Date of financial close 180 Total Expenses 100.00 14739398671
10. Tally of expense Profit loss -4.12 -583600363
7. Current Status
Source: L & T METRO RAIL (HYDERABAD) LIMITED - 8th ANNUAL REPORT (FY 2017-18) 8
1. Introduction Financial Arrangement
The project cost and other necessary inputs are given below
2. Scope of
Project Project COST = 2.73 bil USD (INR 16,375 Cr.)

MRT - 2.36 bil USD (INR 14,132 Cr.) + Property Dev. - 0.37 bil USD (INR 2,243 Cr.)
3. Risks

4. PPP model Senior Debt INR 11,478 Cr.

and share IRR
Subordinate Debt INR 1,000 Cr.
Project IRR : 13.89%

5. Financial
Arrangement Equity INR 2,439 Cr. Equity  IRR : 17.50%

6. Shares of Other Sources (VGF) INR 1,458 Cr.

Responsibility

7. Current Status
Source: L & T METRO RAIL (HYDERABAD) LIMITED - 8th ANNUAL REPORT (FY 2017-18) 9
1. Introduction Shares of Responsibility
The roles of the concessionaire (as given by the document) are below
2. Scope of Content of Concession 3. Financial Covenant
Project The concept of independent
agreement 1. Financial close engineer
1. Concession 2. 2.User fare 1. Appointed by govt. for 5
1. Scope of project 3. Concession fare years.
3. Risks
2. Grants and condition 4. Escrow account 2. For audit of construction
3. Obligation of concessionaire 5. Insurance quality and standards.
and government 6. Revenue shortfall 3. Submit timely status of
4. PPP model work for fund dispersal.
2. Development and operations 4. Termination
and share 4. In case of HYD metro, the
1. ROW 5. Other provisions
independent engineer firm
2. Construction of rail system 1. Disputes has been given to
5. Financial 3. Utilities, associated roads 2. Liabilities AECOM.
Arrangement and trees 3. Change in law
4. Monitoring and completion 4. Grievance
5. Commercial usage redressal Concessionaire
6. O&M 6. Schedules L&T Hyd. Metro
6. Shares of
Responsibility 7. Commercial development 1. Description of
Public Entity
8. Safety standards facilities to be used GoAP
9. Performance indicators 2. Material standards
7. Current Status
Source: L & T METRO RAIL (HYDERABAD) LIMITED - 8th ANNUAL REPORT (FY 2017-18) 10
1. Introduction Current Status
The given below details are the project completion status of the Metro Rail project as of the
2. Scope of date 30 - September - 2018
Project
Corridor Number Corridor Details Completion
Financial Closure for this
3. Risks Corridor I - Miyapur to LB Nagar mega Project was
achieved within a record
Stage 2 Miyapur to SR Nagar 100% period of six months in the
first week of March 2011.
4. PPP model Stage 5 SR Nagar to LB Nagar 100%
and share
Corridor II - JBS to Falaknuma

5. Financial Stage 6/1 JBS to MGBS 96%

Arrangement
Corridor III - Nagole to Shilparamam
The completion rate is in terms
of remaining foundations to be
6. Shares of Stage 1 Nagole to Mettuguda 100% cast, piers to be constructed
Responsibility and erection of spans and
Stage 3 Mettuguda to Begumpet 100% segments.

Stage 4 Begumpet to Shilparamam 97%

7. Current
Status Source: https://hmrl.co.in/project-updates.html# 11
1. Introduction Current Status
During FY 2017-2018, the strategy was to maintain the debt to adjusted capital ratio at 2.34:1
2. Scope of but they were only able to achieve 2.26:1 with the strategies followed.
Project
Total debt 94497123165 The Current Revenue Model
Net debt 94142831690
3. Risks Total equity 22069773280
Non convertible debentures 7500000000
5.0%
4. PPP model Viability gap fund 12041953635
and share Adjusted capital 41611726915
Debt to adjusted capital ratio is 2.26:1. 50.0%
45.0%
5. Financial
Arrangement Revenue from operations (existing revenue collection)
User fare 53.8
Leasing 29.1
6. Shares of Advertising 1.3
Responsibility
Consultancy and Income 3.0 Fare Box
Investment income 12.9 Property Dev.
Revenue from operations is 4.43 percent of total income. Misc (Ads + Parking Fee)
7. Current
Status Source: https://hmrl.co.in/project-updates.html# 12
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