HCC will spin off and list four of its businesses

MUMBAI: Hindustan Construction Company (HCC) will spin off four businesses —- construction, infrastructure development, real estate and the Lavasa project —- and list them separately, Ajit Gulabchand, chairman and managing director of the company, said while announcing restructuring plans on Friday.

He did not elaborate on what happens to the currently listed entity following the quadrifurcation.

“This will be done when the markets improve. Lavasa will be the first off the block,” said Praveen Sood, group CFO, HCC.

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 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, Gulabchand said.
 
Gulabchand adds, “It will not be a gated community and we expect that after 6 years the third phase of the project would begin and we are positive that by 2010 we will have positive cash flow in our books.”

Lavasa has so far earned Rs 550 crore through sales of 160 apartments and villas clubbed together from June 27, 2008.

Sood said a second round of property sales will be conducted in August.
Tobacco to hotels major 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 Hospital 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, Gulabchand said.

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 (NCDs) worth Rs 100 crore to the Life Insurance Corporation on a preferential basis.

Talking about the Indo-US nuclear treaty, Gulabchand said HCC, which currently has a 65% share of the nuclear plant construction business, will be a beneficiary.

But, he said, orders will take time. “It will take a year after the deal is formally signed for everything to materialise. We expect that by 2011-2012, construction will begin,” Gulabchand said.

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.