HCC wants to spin off Lavasa and other 3 businesses

HCC plans to spin off four businesses -- construction, infrastructure development, real estate and the Lavasa project, the beautiful township on Mumbai Pune Highway (Read more) -- and list them separately as a part of its restructuring plan.

Ajit Gulabchand, chairman and managing director said that LAVASA would be the first on the block. HCC will restructure Lavasa as a holding company and expects to generate Rs 2,000 crore revenues from it in the next three years by selling and managing properties at the planned commune 64 km from Pune. HCC expects to make positive cash flows from Lavasa from 2010 onwards.

HCC will manage the property by levying municipal charges on residents and charging for security through a public private partnership deal.This would be a first of its kind in the country that the residents would be paying the municipal charges to the holding company than the government directly.

Lavasa has so far earned Rs 550 crore through sales of 160 apartments and villas clubbed together from June 27, 2008. A second round of property sales will be conducted in August. ITC will open its property in Lavasa by October 2008. HCC is also buying stake in most of the developments that are coming up around Lavasa. Most of the stakes range from 26%-76% in most of the projects. For example, it holds a 49% stake in an Apollo unit that is being developed.

In all, the company plans to invest Rs 5,000 crore into construction projects in Lavasa in the next 12 years. Axis Bank has taken a 2.5% stake in the project by investing Rs 250 crore worth debentures which will be converted at the Lavasa IPO price or by the end of the fifth year.

That values the project at Rs 10,000 crore. HCC is also in talks with Deutsche Bank and other banks for raising private equity funding. HCC will issue secured redeemable non-convertible debentures worth Rs 100 crore to the Life Insurance Corporation on a preferential basis.

The company's net sales grew by 22.5% to Rs 895 crore for the quarter ended June 2008 as against last year's Rs 731 crore. However, the company's net profit slipped to Rs 31 crore vis-a-vee Rs 34 crore.

Read more on Lavasa - http://re-it.blogspot.com/2008/06/lavasa-township-gets-fresh-funding.html