Thursday, January 20, 2011

Lavasa's 'vision' problem-arrogance or reality?

As the SPV for India's first planned city(2nd if you count Sahara's Amby valley which is more residential oriented), Hindustan Construction Company(HCC)'s 65% subsidiary Lavasa has ambitious plans. But their risk factor No 18(page 21 of prospectus available here) is something new to me.
The breadth of our vision may serve to distract management who may be unable to achieve or maintain an essential level of expertise in each segment of our business due to too many competing segmental interests. If our management is unable to achieve or maintain a necessary level of expertise or if we do not realize synergies across our business segments, our results of operations would be adversely impacted. Further, given the diverse nature of our business segments, we may be unable to recruit and retain adequately qualified professionals who may instead opt for companies with narrower strategies, which may hamper the growth of our business operations(emphasis added)
I have respect for the immense vision of Lavasa. After all, building a mainly commercially oriented city, with the hope that every square feet of commercial space will induce 2 square feet, does need courage and vision given the relatively remote location. Still, this does seem like the management wants to fill boilerplate or more worryingly, they anticipate the problem of distraction. That begs the question-if HCC cannot do it, who can?

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