Telangana explores GIFT City route for Hyderabad Metro buyout after IRFC loan setback

The Telangana government is exploring alternative funding options through Gujarat's GIFT City to finance its acquisition of the Hyderabad Metro Rail (HMR) Phase I, following the collapse of a proposed loan from the Indian Railway Finance Corporation (IRFC).

The state had engaged SBI Capital Markets (SBI Caps) to arrange a soft loan of approximately ₹13,500 crore to buy the 69.2-km Phase I network from L&T. However, the proposed borrowing of ₹13,527 crore from IRFC was halted in May, reportedly after the Ministry of Railways intervened, stating that IRFC's mandate is limited to financing new projects and not refinancing existing assets.

Senior state officials, speaking on condition of anonymity, said SBI Caps has been asked to quickly identify a new funding partner. They indicated that GIFT City, India's first International Financial Services Centre, could offer a solution as it permits refinancing of existing projects through foreign currency loans. This would provide relief to the state government, which is seeking to break a deadlock with the Centre over expanding Hyderabad Metro through a proposed 50:50 joint venture.

However, it remains unclear whether funding through GIFT City would also require prior approval from the Centre. State officials are optimistic, noting that the government has already secured Reserve Bank of India clearances and provided statutory guarantees to support the proposed borrowing.

There is also uncertainty over whether SBI Caps is revisiting the financial and technical valuation of HMR Phase I earlier conducted by consultants such as IDBI Capital and DMRC International. That assessment formed the basis for fixing the state's equity payment to L&T at ₹1,462 crore and the proposed ₹13,527-crore IRFC loan, which fell through.

During a June meeting attended by Chief Minister A. Revanth Reddy and Union Ministers Manohar Lal Khattar, Ashwini Vaishnaw and G. Kishan Reddy, it was decided that SBI Caps would undertake a fresh valuation of HMR Phase I. The objective is to create a unified metro entity comprising both the existing network and the proposed 122.9-km Phase II project, estimated to cost ₹38,595 crore, thereby facilitating 50% equity participation by the Centre.

While the Centre and the state were expected to nominate officials to coordinate the process, little progress has been made public. Meanwhile, the state government appears to be moving ahead with preparations for HMR Phase II, including seeking departmental clearances, calling tenders to appoint a General Consultant for five of the seven proposed corridors covering 63 km, and approaching DMRC for procurement of 60 metro coaches to augment HMR Phase I.

There could be roadblocks ahead. “Without formation of the JV and the required approvals from the Centre, the statutory agencies concerned will not grant clearances for new train set operations or commissioning new routes as per the Metro Act,” said an official who did not wish to be identified.