The Telangana government has agreed to take over the debt-laden Hyderabad Metro Rail Phase 1 from Larsen & Toubro Ltd., absorbing ₹13,000 crore in liabilities and paying the company ₹2,000 crore for its exit, in a move aimed at unblocking the state’s long-stalled metro expansion.

The decision, finalized after high-level talks between Chief Minister A. Revanth Reddy and L&T Chairman and MD S.N. Subrahmanyan on Thursday, marks a strategic move by the state to unblock progress on the long-stalled metro expansion.

Phase 1 of the metro, operated by L&T’s subsidiary L&T Metro Rail (Hyderabad) Ltd, has been a financial strain on the company. L&T’s net loss from the project widened to ₹626 crore in FY25, while operational and other income dropped 21% to ₹1,109 crore, according to its latest annual report.

With mounting losses and a lack of sustained state support, L&T had formally requested to exit the project. As part of the agreement, the Telangana government will assume the full debt load of Phase 1 and settle L&T’s equity stake with a one-time ₹2,000 crore payout.

Although Chief Minister Reddy urged L&T to remain involved in Phase 2, Subrahmanyan declined to participate as an equity partner and refused to sign a definitive agreement on cost and revenue sharing. The company cited major concerns over seamless operations between the two phases and unresolved financial structures.

This transition now clears a path for the central government’s long-awaited approval of Phase 2, though the absence of a private partner may reshape the funding and execution model.

L&T, meanwhile, reported a consolidated net profit of ₹3,617 crore on revenue of ₹63,679 crore for the June quarter. Its stock closed 0.8% lower on the NSE at ₹3,644.40