Maytas to seek extension for financial closure

Express News Service 17 Mar 2009
Maytas Infrastructure, which bagged the Rs 12,000- crore Hyderabad Metro Rail Project, is likely to seek extension from the State Government to achieve financial closure. Sources said, since the company couldn’t achieve financial closure by March 17, it will write to the authorities citing its inability to raise necessary funds from banks and financial institutions due to the ongoing economic crisis.


“They (Maytas) will communicate with the officials about the reasons for the delay in achieving financial closure and borrow time,” said a company official. As per the bid agreement, the financial closure should be done within 180 days of winning the contract.

The project was awarded to Nava Bharat-led consortium, which has Maytas as the lead partner, on September 19, 2008. It also has Infrastructure Leasing and Financial Service Ltd (IL&FS) and Italian- Thai Development Public Company Ltd, Thailand’s largest civil and infrastructure construction company as other partners. By executing the project, the consortium, also agreed to pay Rs 1,240 crore per annum to the Government as revenue.

While the total cost of the 71 km project is estimated to be Rs 12,000 crore, Maytas is expected to raise equity of Rs 4,000 crore besides a debt component of Rs 6,000 crore.

Besides, they are also expected to furnish performance security of Rs 240 crore as bank guarantee by March 17 and the Government is expected to allocate land within the next 60 days.

Incidentally, even if the company fails to achieve the financial closure, one of the clauses in the contract will rescue Maytas. They can deposit the bank guarantee of Rs 240 crore and get 60 days for financial closure. But Maytas will have to pay 1 per cent of the Rs 240 crore -- Rs 24 lakh per day -- as penalty, payable every week as advance.

Now, whether Maytas will be successful in seeking additional time and thereby achieve financial closure in these tough times, remains to be seen.