Experts panel recommends conditional approval for first phase of HCC’s Lavasa project

A high-level committee is to be constituted that will examine, verify and monitor the project at various stages and the compliance of conditions

Mumbai: An Expert Appraisal Committee (EAC) set up by the environment ministry has recommended conditional approval to Lavasa Corporation, a subsidiary of Hindustan Construction Company (HCC), for the first phase of its 2,000 hectares hill town project, near Pune.

"We welcome the recommendation of the Expert Appraisal Committee. The Committee has recommended clearances for Lavasa's first phase of the 2,000 hectares hill town project with some conditions," HCC's chairman and managing director, Ajit Gulabchand, told shareholders at the company's annual general meeting today.

Subject to the pendency of some issues of Lavasa Corporation before the Bombay High Court, the Committee has recommended the proposal for environmental clearance for the first phase of 2,000 hectares with conditions, the panel has said. The report has been posted online, PTI reports.

The infrastructure major needs to allocate at least 5% of the project's total cost for community development projects and a time-bound action plan will have to be prepared and submitted to the ministry's regional office at Bhopal, it said.

"We have lost Rs2 crore a day since the work stopped and around 1,500 workers have lost their jobs. The ministry should take a decision soon, keeping the committee recommendations in mind," Mr Gulabchand said.

The panel said a high-level Verification and Monitoring Committee (VMC) shall be constituted, with the inclusion of eminent experts, representatives of MoEF and District Administration.

The committee shall examine, verify and monitor at various stages (planning, construction, operation and maintenance) of the project and the compliance of the conditions.

In December last year, the environment ministry had ordered status quo to be maintained at the site, terming it "unauthorised", and it observed that Lavasa Corporation, the site developer and a subsidiary of HCC, had violated the Environment Impact Assessment (EIA) notifications.

Lavasa Corporation challenged this order in the Bombay High Court and the matter is pending before the Court.

In February, the company had also applied for grant of environment clearance for the first phase of the project.

Before that, in January this year, the environment ministry said it was ready to consider the project on "merits", subject to fulfilment of certain conditions.


Brokerages believe decisive government action needed to reverse market downtrend; advise accumulating good names

Brokerages say inflation and high rates have been a bother for the market, which has corrected nearly 10% this year. They point out that while environmental and corruption issues have pushed back investment, capital goods orders have been better than expected recently, and there could be a revival in investment activity in the second half of the year

The political temperature has been rising in India lately, amid howls of protest against corruption by civil rights activists led by Anna Hazare and yoga guru Baba Ramdev. Add to this the concerns over stubborn inflation, rising interest rates and uncertainty over the monsoon and it seems like so much gloom. However, according to some brokerages, amidst the micro-economic concerns, there may still be a silver lining in the Indian markets.

Kotak Securities says inexpensive valuations and reasonable earnings visibility are positives in an otherwise gloomy near-term macro outlook, caused mainly by high crude oil prices and inflation. It believes that a decline in crude oil prices and improved governance on policy reforms, along with a crackdown on corruption, could shore up sentiment, but the government would have to act more decisively.

The brokerage stated in a report that the BSE-30 Index is trading at 14.4X FY12 estimated earnings per share (EPS) on a full market-cap basis and 12.7X FY13E EPS compared to its historically trading band of 12X-16X 12-month forward EPS. The market seemed to be factoring in macro concerns arising from high crude oil prices, inflation and interest rates, the brokerage said, and it suggested that there doesn't seem to be any early resolution of these hard realities unless crude oil prices correct significantly from current elevated levels.

Worries over inflation and rising interest rates have dominated market sentiment this year, and particularly in the past few weeks after the Reserve Bank of India (RBI) tightened rates more aggressively than anticipated. Last month, the RBI hiked policy rates by 50 basis points (bps). From its trough in March 2010, the RBI has hiked the repo rate by 250 bps this cycle, with 400 bps of effective tightening, given tighter liquidity conditions, it has lifted the overnight call rate from the bottom to over the top of the interest rate corridor.

In a note, Macquarie Research, said, "Given fair valuations and the lack of any incremental positive outcome on the macro front, we believe markets will continue to trade in a narrow range over the next couple of months. At 14.5X, the market looks fairly valued in relation to its long-term average. This de-rating has brought about a 15% change in the 12-month forward PE, down from around 17x six months ago."

High crude oil prices remain the biggest negative macro factor for the market, with its perverse impact on high subsidies and inflation. However, any decline in global crude oil prices and increase in retail selling prices of diesel, kerosene and LPG will help reduce overall gross under-recoveries and improve earnings visibility of the government-owned upstream and downstream oil companies and overall investment sentiment, Kotak Securities says.

Over the past year, government policy specifically related to environmental and land acquisition hurdles, corruption issues, coupled with concerns on coal procurement, have stalled progress on investments. The impact of policy uncertainty was reflected in diverging trends in the first half of FY11, when investment growth came in at 14.7%, and the second half of FY11 when growth slowed to 4.1%.

Citigroup expects trends in the first half of FY12 will remain weak. But it expects a recovery in the second half, resulting in overall investment growth coming at 5.4%, against 8.4% in FY11. "If we don't see an investment recovery in 2HFY12, overall investment growth could slow to 2.5% levels, resulting in headline GDP growth at 7.2%," Citigroup said in a research report.

Over the last six quarters, the Indian markets have remained in a range and the benchmark Sensex has delivered 6% returns since December 2009. Motilal Oswal Securities says, "If markets were to consolidate at current levels for another couple of quarters, valuations will start trending below long-term averages on FY13 earnings. The key factors to drive markets in this period would be global commodity trends and any resurgence in domestic reforms and industrial activity."

According to the government's Infrastructure and Project Monitoring Division, as of December 2010, over 53% of central infrastructure projects were running behind schedule, due to time and cost overruns. "At the same time, we have not yet seen a meaningful recovery in private capex. The silver lining, however, is order inflow, which has turned out better than expected in Q4FY11 for most of the big capital goods companies. As per our expectation at the beginning of the year, we may see investment activity pick up in the second half of FY12, contingent on inflation and rates stabilising," says Macquarie Research.

"While the market looks fairly priced at the moment, the uncertain macro environment, due to high inflation and interest rates, indicates that risks are to the downside. While the market may continue to remain in a narrow band over the next few months, investors should consider focusing on accumulating good quality names that have strong balance sheets and visibility in earnings," the brokerage says.


Exports in May jump by 57% to $25.9 billion

India's exports grew by an impressive 56.9% to $25.9 billion year-on-year in May while imports went up by 54.1% to $40.9 billion, leaving a trade deficit of $15 billion

New Delhi: India's exports grew by an impressive 56.9% to $25.9 billion year-on-year in May on account of increasing demand from the Western markets, reports PTI.

Imports, too, went up by 54.1% to $40.9 billion, leaving a trade deficit of $15 billion. "This is the highest imports figure in the last four years," commerce secretary Rahul Khullar told reporters here.

During April-May, exports increased by 45.3% to $49.8 billion. "Good run of exports are continuing," Mr Khullar added.

Imports during the first two months of the current fiscal grew by 33.3% to $73.7 billion. The trade deficit during the period stood at $23.9 billion.


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