According to PTI reports, the Telangana government is set to takeover Phase-I of the Hyderabad Metro Rail project, where L&T has a substantial stake, and pay the company ₹2,000 crore in return for its portion of the stake.
Additionally, the Telangana Government will also takeover debt of the project worth over ₹13,000, which was one of the demands that L&T had made. However, earlier reports had indicated that L&T had made a demand of ₹5,900 crore, in addition to the debt takeover before the Telangana government.
Brokerage firm JM Financial wrote in a note that L&T’s potential exit removes a long-term overhang on the stock, and is also modestly accretive to the company’s Earnings Per Share (EPS).
Exits from such an asset will save L&T more than ₹600 crore on a Profit Before Tax / Profit After Tax level, and can also seen an EPS uptick of 4%, JM Financial’s note said.
The exit can also boost L&T’s RoE by 60-70 basis points as well, the brokerage said.
Speaking to CNBC-TV18 last month, SN Subrahmanyan, chairman and managing director of Larsen & Toubro (L&T), described the Hyderabad Metro as “probably the most complicated investment we have ever done,” noting that the company has put in over ₹20,000 crore to run one of the few private metro projects in the world.
“Probably, we should not have done it — but we have, and now it’s an asset with us. It is also, in my view, one of the best-run metros in the world. We do compare ourselves with Hong Kong, Singapore and such,” Subrahmanyan had said.
Shares of Larsen & Toubro are extending their gains, currently trading 3.5% higher at ₹3,769.4. The stock is also closing in on its 52-week high of ₹3,963.
