Real estate player Lavasa Corporation may have filed its draft red herring prospectus for the IPO to raise around Rs 2,000 crore from the market but the show cause notice issued by the environment ministry may just defer their plans, say merchant bankers.
“The first bottleneck will be that the regulator (Securities and Exchange Board of India) will look into the document and may ask the company to incorporate this in the risk factors,” said the head of a leading investment banking firm on conditions of anonymity. “The second is that the company may have to defer its plans depending on the magnitude of this issue and its impact on the overall business.”
If market experts within the industry are to be believed, what was expected to hit the market by the end of December 2010 or in January 2011, could now get deferred till this issue is settled.
“The company and its merchant bankers will have to weight their options and may consider deferring their IPO plans till this issue settles,” said another investment banker who did not wish to be named.
Even one of the merchant bankers to Lavasa’s public issue felt that the issue should wait till things are resolved.
"It would be better if the IPO hits the market after the issues (around environment) are settled,” a senior official at one of the investment bankers to the issue, told HT.
A source close to the development however said that the company will meet with its merchant bankers in December to decide on the correct time to hit the market. “As of now our priority is to address the concerns raised by the Ministry of Environment and Forests (MoEF) and we still have 12 days for it,” said the source. “None of the merchant bankers to the issue have raised any concerns as of now on the issue planned,” he added.
The company has already stalled all work at its hill city and has withdrawn all vehicles, manpower and earthmovers from the 25,000 acre site. The company in a statement said that it was ‘shocked’ at the receipt of a 'stop work' notice from MOEF on November 26, 2010.
Environment ministry on Friday served a notice to Lavasa on charges of violating environment norms. Hindustan Construction Company that owns 65 per cent in the company saw its share price fall by 18.99 per cent on Friday after the notice came in.