Hyderabad Metro Takeover Stalls as Telangana Hunts Yen Loans

The Telangana government’s planned acquisition of the Hyderabad Metro Rail Phase I from Larsen & Toubro has been delayed after a proposed ₹13,600 crore financing package failed to materialize. With the initial Indian Railway Finance Corporation (IRFC) loan undisbursed and a crucial financial evaluation stalled, the state is now urgently scouting for lower-cost, yen-denominated loans to complete the transaction by September 2026.

₹13,600 Crore IRFC Loan and SBI Caps Assessment Stalled

The financing roadmap hit a fresh roadblock when the proposed SBI Capital Markets (SBI Caps) evaluation did not move forward. SBI Caps was originally expected to assess Phase I asset viability, facilitate debt refinancing, and structure funding for the upcoming Phase II network.

A senior Municipal Administration Department official revealed that some Union ministers had previously assured Telangana that the Centre would take an equity stake in Phase I following the SBI Caps evaluation. However, the assessment halted when the state government learned the Centre would not be involved in the existing phase, leaving Telangana without formal appointment orders or terms of reference for the financial review.

In response to the stalled process, Chief Minister A Revanth Reddy has written to the IRFC and the Union Ministry of Housing and Urban Affairs regarding the funding uncertainty. He has also directed state officials to actively examine alternative financing avenues to prevent further delays.

What the Financing Delay Means for Metro Commuters

While the funding dispute introduces operational and administrative hurdles, the August 4 report confirms no immediate changes to Hyderabad Metro services, fares, or daily operations. The primary issue concerns ownership transfers and long-term debt servicing rather than day-to-day transit functionality.

For Telangana taxpayers, however, the government faces major uncertainty over the cost of replacing the IRFC financing. Unresolved transit expansion often pushes homebuyers to double-check Telangana RERA Approved Projects along proposed corridors to ensure their real estate investments remain insulated from infrastructure delays.

Phase I Ownership Vital for Hyderabad’s Expansion

The immediate financing gap directly impacts Hyderabad by freezing Telangana’s acquisition of the city’s existing Metro Rail Phase I. This delay trickles down to affect the proposed Phase II expansion, creating a ripple effect across the city’s infrastructure roadmap.

Infrastructure lenders and public authorities typically require absolute clarity on Phase I ownership, existing liabilities, and the project’s overarching financial viability before committing fresh capital to Phase II. Clear property alignments and updates via the Bhu Bharati Portal will also rely heavily on finalizing these funding structures.

“The government is scouting for lenders offering loans in Japanese yen because such financing carries lower interest rates; borrowing at higher rates would make it difficult to run the metro.”

How the May 1 Takeover Deadline Was Missed

In April 2026, Telangana reached an agreement with L&T to acquire the infrastructure major’s 100% stake in L&T Hyderabad Metro Rail. The takeover was initially scheduled to take effect on May 1, 2026.

To fund the acquisition, the state planned to rely heavily on the ₹13,600 crore IRFC loan, with the first instalment expected on May 27. When these funds remained undisbursed and the central equity plan fell through, L&T subsequently informed the National Stock Exchange that the expected completion timeline for the sale had been pushed back.

Alternative Lenders Needed Before September Deadline

With L&T extending its sale completion window to September 2026, Telangana is racing to identify alternative banks and financial institutions capable of replacing the original financing package.

The state’s primary focus has shifted to securing lower-cost, yen-denominated funding to bypass domestic borrowing rates, which currently hover around 8%. The government must soon decide whether to completely abandon the IRFC application or secure a blended financial closure to finalize the takeover.