Riding on a rally in real estate stocks and an improvement in investor sentiment, Lavasa Corporation is planning to raise Rs 750 crore (Rs 7.5 billion) through an initial public offering.
This is the second time that Lavasa, which is setting up the country’s first planned hill city, is considering an IPO.
Its earlier plan to raise Rs 2,000 crore (Rs 20 billion) by diluting a 10 per cent promoter stake was dropped in 2010 due to adverse market conditions and controversies around the township.
Bankers say the company’s valuation is likely to drop sharply from the Rs 20,000 crore (Rs 200 billion) in 2010, as the promoters could this time dilute over 15 per cent stake to raise Rs 750 crore (Rs 7.5 billion).
While Lavasa executives could not be reached for comments, analysts said the reason for the valuation drop was understandable.
“In 2010, Lavasa was selling four million sq ft annually and had announced its intention to increase this to 12 million sq foot.
"Now it sells only one million sq ft. At 15 per cent equity dulution, the valuation would now be around Rs 5,000 crore (Rs 50 billion),” an analyst said.
Axis Capital, Kotak Investment Banking and ICICI Securities are the bankers to the issue.
IPOs of private realty developers Prestige Estates and Oberoi Realty in October 2010 were the last big ones.
Government-owned NBCC went public in March 2012.
According to experts, some other real estate companies that had wanted to float public issues in 2011-12 but did not proceed might now look at IPOs.
Lavasa’s debt, which stood at Rs 1,500 crore (Rs 15 billion) in 2010, has increased to Rs 3,397 crore (Rs 33.97 billion) at present.
Its surplus & reserves stand at a negative Rs 558 crore (Rs 5.58 billion).
The company, which is developing its township on the hills in Lavasa near Pune, plans to use Rs 250 crore (Rs 2.5 billion) for construction of certain buildings in Dasve and Mugaon sections of the township, Rs 100 crore (Rs 1 billion) for development of infrastructure in Mugaon, Rs 200 crore (Rs 2 billion) for repayment of debt and the rest for other corporate purposes.
HCC Real Estate, the realty arm of Ajit Gulabchand’s Hindustan Construction Company, holds a 68.7 per cent stake in Lavasa, while Gautam Thapar’s Avantha Group owns 17.18 per cent.
Other stakeholders are Venkateshwara Hatcheries (7.81 per cent) and Pune-based investor Vinay Maniar (6.29 per cent).
According to its draft red-herring prospectus, Lavasa posted a net loss of Rs 186 crore on a total income of Rs 171.3 crore during 2013-14.
The company has seen its share of controversies in the past.
In late 2010, the environment & forests ministry issued a showcause notice to the township, alleging violation of the environment impact assessment notifications.
It had directed the company to maintain the status quo on all construction activities in the township which led to stoppage of work in Lavasa for almost a year.
Though the ministry passed an order against Lavasa in early 2011 on the same matter, the company moved the Bombay High Court against the showcause notice and the order through two petitions.
Both matters are pending in the court.
There also were public interest litigation filed against Lavasa, claiming it bought over 10,000 acres in violation of Section 9 and 10 of the Maharashtra Agricultural (Ceiling on Holdings) Act, 1961.