IRFC–Hyderabad Metro Refinancing Deal Cuts Debt Costs

The agreement signed between Indian Railway Finance Corporation (IRFC) and Hyderabad Metro Rail Limited (HMRL) is set to turn the latter into a profitable project in the next one year as the overall borrowing cost will come down significantly from about 10.5% to about 7%.

On Monday, the IRFC signed a Rs 13,527 cr refinancing agreement with the Hyderabad Metro Rail that could substantially cut down the metro’s debt servicing obligations.

By inking the pact, the IRFC enters urban metro financing. It said that it now ready to fund more metro projects across India, using the same low-cost financing mechanism.

The transaction includes transfer of complete ownership of HMRL from L&T to the Telangana state government, at a total cost of Rs 1,400 crore.

Telangana Chief Secretary K. Ramakrishna Rao said the HMRL was already operationally profitable but recording losses due to the high debt piling up under the public-private partnership (PPP). He expressed hope that after the state government taking over the project, the real estate could be monetized quickly.

As part of the agreement, the loan is structured over a 20-year tenure with quarterly repayments. The refinancing replaces HMRL’s higher-cost debt with comparatively low-priced long-term rupee financing.

Further, there is no processing fee, commitment charges or prepayment penalties for the transaction, making it borrower-friendly refinancing mechanism.

IRFC CMD & CEO Manoj Kumar Dubey said the transaction would be funded through a mix of instruments, including external commercial borrowing, bonds, and rupee-dominated loans.

The Telangana government said the refinancing was vital to not only lower the finance costs but also aid Hyderabad Metro’s future expansion. The state government is planning to add another 162 km of metro rail network to the existing 69.2 km network spanning three corridors and 57 stations.