MMRDA Acquiring Reliance Infrastructure’s Stake in Metro-1 Corridor

An internal study group, headed by former chief secretary Johny Joseph, has completed a valuation assessment of Reliance Infrastructure R-Infra’s 74% stake in the Metro-1 corridor. According to reports, the group has valued the stake at Rs 40 billion and presented its findings to the Mumbai Metropolitan Region Development Authority (MMRDA).

Mumbai Metro-1: A Vital Link Connecting Suburbs

The Metro-1 line, which stretches over 11.4 km and connects Versova-Andheri-Ghatkopar, plays a crucial role in providing connectivity between the Eastern and Western suburbs to the Western and Central railway. Managed by a special purpose vehicle (SPV) called Mumbai Metro One (MMOPL), this public-private partnership initiative is jointed owned by MMRDA (26% stake) and R-Infra (74%).

Disagreements Over Valuation Continue

The process of acquiring R-Infra’s stake in the Metro-1 corridor has been drawn out for several years, primarily due to disagreements between the government and the company regarding the valuation. However, the study group, leveraging the discounted cash flow model, has taken into account a report by financial advisory firm KROLL to ascertain the stake’s value.

Prolonged Negotiations Impede Progress

While negotiations were initiated in 2020 amid pandemic-induced losses, little progress has been made regarding R-Infra’s stake sale in MMOPL. The decision on whether MMRDA will acquire R-Infra’s stake now awaits presentation to the Maharashtra cabinet.

Challenges Faced by Metro-1 Line and MMOPL

Since its operational commencement in 2014, the Metro-1 line, considered the oldest in the city, has faced several challenges. MMOPL has confronted difficulties in raising fares as the second fare fixation committee rejected the proposed hike in 2019. Instead, the committee suggested exploring non-fare revenue generation avenues.

Lingering Arbitration and Construction Cost Disagreements

Additionally, MMOPL is currently engaged in arbitration over cost escalation during the construction of Metro-1. While MMOPL claims a construction cost of Rs 40.26 billion, MMRDA has countered by asserting the original contract’s cost as Rs 23.56 billion.

Robust Ridership and Temporary Setbacks

Despite the challenges faced, the Metro-1 line has consistently witnessed high ridership, excluding the period of the Covid-related shutdown. On weekdays, the line carries around 4.6 lakh commuters, performing 408 daily trips. As the acquisition decision awaits consideration by the Maharashtra cabinet, it remains to be seen how the valuation assessment conducted by the study group will influence the fate of R-Infra’s stake in the Mumbai Metro-1 corridor. The outcome will profoundly impact the future of the vital transportation link that serves as a lifeline for commuters in the Mumbai Metropolitan Region.

Sumit Mondal Content Analyst at Square Yards
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