To ease debt, L&T looks to offload Nabha Power, pare Hyd Metro stake

After the divestment of Infrastructure Development Projects (IDPL), engineering major Larsen & Toubro (L&T) is looking at offloading Nabha Power in Punjab to potential buyers, as well as paring its stake in Hyderabad Metro to 26 per cent. Both Nabha Power and Hyderabad Metro are subsidiaries of L&T.

The objective is to reduce the Rs 18,000-crore debt on the books of these firms, said D K Sen, whole-time director and senior executive vice-president (development projects), L&T. 

The company’s Lakshya 2026 roadmap had identified sub-scale businesses that the company needed to exit, and suggested concentrating its attention on high-tech manufacturing, construction and green energy projects, and increasing its share in the information technology (IT), digital services and data center space.

"IDPL was one of the non-core assets identified for divestment by L&T as part of its Lakshya 2026 plan. This has finally happened with Edelweiss Alternatives acquiring IDPL. The next stage will see us focus our attention on divesting Nabha Power in Punjab and reducing our stake in Hyderabad Metro. For this, we are working on various proposals, which we should finalise by the end of FY23," says Sen. 

Nabha Power, a subsidiary of L&T, had a debt of Rs 5,341 crore as on March 31, 2022. Hyderabad Metro, also a subsidiary of L&T, has a debt of nearly Rs 13,000 crore, according to company officials. L&T hopes to reduce the debt level to around Rs 8,000 crore in the near term in the case of Hyderabad Metro by monetising land parcels that are part of the metro project. The Government of Telangana has also sanctioned a Rs 3,000-crore loan, which will be disbursed in tranches to the company, says Sen.

On Nabha Power, according to Sen, L&T is talking to potential buyers of thermal power assets for an outright sale. The company may also look to convert some of its debt into equity.

"Nabha Power is a good asset with a power-purchase agreement that runs right up to 2040. We are looking at a fair valuation for the business," Sen says.

For the year ended March 31, 2022, Nabha Power had a top-line of Rs 4,129 crore, showing growth of 22 per cent over the previous year. Net profit stood at Rs 302 crore for FY22, up 84 per cent versus the previous year, according to its financial statements.

At the same time, the company is counting on improved passenger traffic on the Hyderabad Metro as people make their way back to work. From 150,000 passengers a year ago, the daily average number of passengers taking the metro in Hyderabad has increased to around 450,000 now; the company expects the number to touch 600,000 passengers per day in the coming months.

An increase in ridership, coupled with manageable debt, levels should make Hyderabad Metro a viable project for investors, adds Sen.

Hyderabad Metro: Status check

• Rs 13,000-crore debt on its books
• Rs 8,000 crore debt level L&T is targeting in the near term
• 450,000 daily avg passengers on Hyderabad Metro; it was 150,000 a year ago
• 600,000 daily avg passengers the company expects in near term