HCC open to resolve Lavasa issue with ministry   

January 21, 2011

Third-quarter profit drops by half on order delays and slower project executions

Nothing seems to be going right for Hindustan Construction Company (HCC) these days. In November, the environment ministry asked it to stop work on its project at Lavasa. Now, order flows have slowed down. Worse, it has had to bear the cancellation of a project worth Rs230 crore.

"In the third quarter we have not received any new order and an order worth Rs230 crore from NTPC was cancelled due to environmental issues," Vinayak Deshpande, chief operating officer, HCC, told Moneylife.

The company had received a contract to construct a barrage and desilting chamber for NTPC's Loharinag Pala Hydro Electric Power Project (4x150 MW) in Uttarkashi district of Uttaranchal.

"The company has revised its 2010-11 (April-March) order book target of Rs25,000 crore due to persistent delays in infrastructure and power orders from the government," Mr Deshpande said. HCC's current order book stands at Rs18,505 crore and it expects to reach at Rs20,000 crore by the end of this fiscal year.

On the Lavasa project, HCC says it is open to sort out issues with the Ministry of Environment & Forests (MoEF). "We would like to resolve all issues over the Lavasa project with MoEF. I hope we will resume work soon," Ajit Gulabchand, chairman, HCC, said.

The MoEF issued a stop-work notice to the company's Lavasa project, citing environmental problems and the absence of approvals for construction of the 5,000 acre luxury hill city project near Pune. Lavasa Corporation, a subsidiary of HCC, subsequently challenged the notice in court, saying the order was against all laws of natural justice.

However, Mr Gulabchand said that the company would not withdraw the case against the ministry. He also refused to comment on any notification from the MoEF to pay substantial penalty for violation of environmental laws.

HCC today reported a 46% fall in net profit for the October-December quarter to Rs7.94 crore from Rs14.75 crore, due to slower project executions. However, revenues for the quarter increased by 9% to Rs1,028 crore from Rs945 crore.
The company has a cash balance of Rs281 crore, while the debt pressure amounts to Rs3,500 crore.

"During the quarter, we have witnessed a slowdown in infrastructure activity. Several project orders have been deferred by various government departments and private firms due to delays in acquiring land and related clearances," Mr Gulabchand said. — Sharad Matade