L&T shares jump 3%; stock top NIFTY50 gainer today amid sell-off in market; here is why

The reason behind the outperformance of the infrastructure major's stock is the news report that the Telangana government has agreed to take over Phase I of the Hyderabad Metro Rail project from L&T Group by paying ₹2,000 crore for the equity in the concessionaire L&T Metro Rail Hyderabad Ltd. 

It was agreed that the state government would also take over the company's debt of ₹13,000 crore, said a PTI report. 

L&T has about 90% equity in the project. 

Last month, the infra major expressed its desire to offload its stake, the Metro Rail project (about 70 km), to either the state or central government through a new Special Purpose Vehicle (SPV), citing operational and accumulated losses. 

Chief Minister A Revanth Reddy, along with senior officials of the state government, held a meeting with L&T Group CMD S N Subrahmanyan and others on Thursday to discuss the way forward.

"After detailed negotiations, with an objective to expedite the phase 2 approval by GoI, it was agreed in principle that the state government would take over the Phase I Metro Rail project by taking over the debt of the project, which now stands at about ₹13,000 cr. Further, the state government will pay about ₹2,000 crore to L&T towards their equity investment in LTMRHL as a one-time settlement," news agency PTI reported, quoting sources.

L&T, in its letter addressed to the Ministry of Housing and Urban Affairs (MoHUA), had said that it faced several structural, financial and regulatory challenges resulting in substantial cost and time overruns due to delays on account of various reasons beyond the control of the concessionaire, viz., property acquisition, right of way, changes in alignment, utility shifting, etc.

According to the latest annual report of L&T Metro Rail, the revenue from operations and other income for the financial year 2024-25 was ₹1,108.54 crore as against ₹1,399.31 crore for the previous financial year, registering a decrease of 21%.

The loss before and after tax was ₹625.88 crore for the financial year under review as against the loss before and after tax of ₹555.04 crore for the previous financial year, according to a PTI report.

This move, as per market analysts, will be positive for the company and its stock, as the project was one of the overhangs. Hence, exiting a loss-making entity will help the L&T stock log a fresh leg of the rally.