Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
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<strong>Institutional</strong> <strong>Equities</strong><br />
Exhibit 13: Lavasa project -series of events<br />
Date<br />
Development on Lavasa<br />
25.11.2010 Ministry of Environment & Forests (MoEF) issues show-cause notice with status quo ante<br />
28.11.2010 Lavasa replies to show-cause notice to MoEF<br />
30.11.2010 Lavasa files writ petition in Bombay High Court<br />
07.12.2010 Bombay High Court directs MoEF to give a hearing to Lavasa<br />
09.12.2010 MoEF gives a hearing to Lavasa<br />
14.12.2010 MoEF passes an order to continue status quo until final order<br />
22.12.2010 Bombay High Court admits writ petition and directs MoEF to visit Lavasa project<br />
5 -7 January 2011 Expert committee of MoEF and Maharashtra state officials visit Lavasa project<br />
17.01.2011 MoEF passes its final order directing Lavasa to maintain status quo<br />
25.01.2011 Lavasa addresses a letter to MoEF for finding an amicable solution<br />
28.01.2011 MoEF is prepared to consider the matter of giving clearance to Phase-I (2,000 ha)<br />
14.02.2011 Lavasa makes presentation before Expert Committee<br />
31.05.2011 EAC Committee recommended to the MoEF to grant clearance to Lavasa project with certain pre-conditions<br />
27.06.2011 MoEF issues a letter to Lavasa stating the five conditions recommended by EAC<br />
12.07.2011 Lavasa writes a letter to MoEF not accepting the pre-conditions.<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
We believe the company would get the clearance in coming months (with some pre-conditions) considering<br />
the developments that are skewed towards Lavasa. However, losses due to stoppage of construction and the<br />
pre-conditions that will be attached to project would dent the valuation the company was targeting.<br />
Impact of dispute<br />
Lavasa project incurred a loss of Rs580mn in 1QFY12, of which Rs380mn is interest cost.<br />
The company planned to raise around Rs20bn through the equity route which got delayed. We believe<br />
IPO of Lavasa in near future is least likely.<br />
Issues like pre-conditions, cost over-run and concerns related to future development of the project would<br />
dent the valuation of the project.<br />
Lavasa valued at P/BV of 1x on regulatory concerns<br />
Based on NPV method for Lavasa Phase I and remaining land bank at realisable value contributes Rs<br />
17/share. However, looking at the uncertainty on regulatory issues related to environmental clearance, preconditions<br />
delay in IPO of Lavasa and de-rating of valuation of the project; we have valued the project based<br />
on a P/BV of 1x, which is contributing Rs 9/share to our target price. Financial institutions have invested<br />
around Rs10.5bn through DDCD and CCPS with a valuation of around Rs100bn to Rs 200bn for the project.<br />
Our valuation stands at just 5% of the valuation done by financial institutions.<br />
73 HCC