A Lot At Stake: The 10,000-acre Lavasa project in Maharashtra is India’s first privately developed hill station

If and when Lavasa gets completed — and there is still a question mark on the execution of the full project — it will be a spectacular achievement. It will be a spanking built-from-scratch hill station created by a private developer spread over 10,000 acres. If HCC manages to pull it off, it will catapult the company, which is currently a mid-sized construction player with a turnover of Rs 3,500 crore, into the big league.

But before Lavasa can be completed, it will require money — lots of money. By some estimates, it will soak in Rs 40,000 crore before it is completed. So far, HCC has only managed to put in Rs 2,000 crore into the project — Rs 800 crore as equity, and Rs 1,200 crore as debt. And while phase I is almost complete, it now needs a lot more cash to start work on phase II. HCC has just taken board approval to raise Rs 1,500 crore through the qualified institutional investor (QIP) route, a favourite with cash-strapped real estate players. While it doesn’t say that it is raising this money only for Lavasa, CFO Praveen Sood admits the money will largely be for infrastructure projects, including the hill station.

The problem is this is a pretty tough market to raise money in for a real estate gamble as big as Lavasa — and investors are turning skittish. But HCC chairman Ajit Gulabchand is going to push ahead nonetheless. This is HCC’s biggest gamble and he cannot turn back now.

The Two Icons
To understand the importance of Lavasa for Gulabchand, one needs to realise how much is at stake. For years, HCC has been a middle-of-the-rung construction player — an EPC (engineering projects company). It is neither much better, nor much worse, than most of its peers. (see ‘Peer Parallel’). But for some time now, it has been trying to break into the big league.

Its first big attempt to move up the chain came in when it bid and won the Bandra-Worli sea link project. The eight-lane, cable-stayed bridge connecting Bandra to Worli was the first part of the proposed Western Island Freeway system. It is a spectacular project in its conception — a bridge over the sea, connecting the western suburbs to central Mumbai, bypassing the congested roads. The sea-link, completed a full year behind schedule, will finally cost Rs 1,600 crore — three times the original budget of 2001.

The Maharashtra government’s decision to declare 25,000 acres as a hill station with a statutory Special Planning Authority has helped his cause by fast-tracking clearances through a single-window, five-member authority. “It would have otherwise taken us 10,000 years to build the town,” says Gulabchand.