Lavasa, a hill city being developed outside Mumbai by Lavasa Corporation is in the thick of controversy. HT gets behind the controversy.
Who’s behind Lavasa?
Lavasa Corporation is promoted by Hindustan Construction Company (HCC), which in turn is promoted by Ajit Gulabchand. HCC holds 65% stake in Lavasa. It plans to develop 5 towns under the project and expects to complete the first town in 2011 and the second by 2013-14.
What is the current controversy?
The Ministry of Environment and Forests (MoEF) on Friday issued a show-cause notice asking why the construction should not be razed, as construction is being done on land above 1,000 metres — against policy. Lavasa has been ordered to remove entirely, all unauthorised structures erected without clearance. It also said clearance from the Centre was never sought.
What is Lavasa’s response?
Lavasa said on Monday that there are mala fide intentions against the project, and the MoEF has come under the influence of activists like Medha Patkar. The company said the show-cause notice was issued ‘in haste’, no notice was issued before the ‘drastic order’, and the planned IPO is under attack.
Why is the timing critical?
The company is lining up its initial public offering (IPO), to raise around R2,000 crore. The issue was slated for in December 2010 or January 2011. Of the money raised in the IPO, R1,700 crore was to be used to service debt.
Does the controversy affect Lavasa’s IPO plans?
Merchant bankers are of the view that the company should first clear the dust surrounding the fate of the project and only then come out with the IPO. Also, if it proceeds with the share offer, it will have to incorporate the risk factors.
Is this the only controversy?
The Maharashtra revenue department is probing certain land transactions of Lavasa. The company maintains there is no irregularity in land transactions.
What will be the fallout of the ministry’s order?
The company claims it has invested around R3,000 crore in the project. If the project is spiked, thousands of employees would be forced to exit, it claims.