Gammon India Ltd Management Discussions.


Infrastructure development is one of the vital parameters for contribution to the GDP of the nation. It also generates a substantial percentage of employment opportunities. Being one of the most resilient sectors, it plays a crucial role in accelerating Indias overall development, thereby driving its economic growth. Increased government spending on projects offers strength to Indias competitiveness across the globe. As per Indian Infrastructure Sector in India Industry Report, India plans to spend US$ 1.4 trillion on infrastructure between 2019 to 2023 which is predicted to boost the expansive growth of the sector. According to the estimates of the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the construction development and construction sector stood at US$ 25.78 billion and US$ 17.22 billion, respectively, between the period April 2000 and September 2020.

Going forward

• By 2025, Construction market in India is expected to emerge as the third largest globally

• By 2025, Construction output is expected to grow on an average by 7.1% each year

• Construction equipment industry revenue stood at $ 6.5 Bn in 2020

• 100% FDI under automatic route is permitted in completed projects for operations and management of townships, malls/ shopping complexes, and business constructions.

• 100% FDI is allowed under the automatic route for urban infrastructures such as urban transport, water supply and sewerage and sewage treatment.

Government initiatives

The Indian Infrastructure Sector has a multiplier effect on several other sectors. Further, to strengthen the sector, the Government has announced several initiatives to have a remarkable impact on the Countrys infrastructure. Considering the Countrys ongoing scenario, the Government has announced its plans to allocate a huge fund to give a massive push to the sector and enhance transport infrastructure. As a result, an efficacious conclusion will be given to a huge number of infra projects.

For a considerable time Infrastructure Sector was driven based on socio-economic reasons and it remained supressed for initial half century of the Independence. It is only post liberalization it has opened up and India witnessed a spurt in the Sector. It will be one of the major contributor for Honourable Prime Ministers ambitious vision of 5-trillion plan by 2025. Unfortunately for last couple of years there is a set-back due to various reasons, one of it being Pandemic across the world which has affected the growth and brought it to a minimum level.

The COVID-19 Pandemic and consequent nationwide lockdown announced by the Government of India since March 24, 2020 had a significant adverse impact on the operations of the Company as being faced by the Nation and the globe as a whole. Since the Company is involved in Construction related activities which fall under the non-essential category, the Company has temporarily suspended operations in the on-going projects at site.


The Companys operations continued to be affected in the last few years by various factors including liquidity crunch, unavailability of resources on timely basis, delays in execution of projects, delays in land acquisition, operational issues etc. The Companys overseas operations are affected due to weak order booking, paucity of working capital and uncertain business environment. Unfortunately the world as a whole is facing a Pandemic on a larger scale.

The Company is in the advanced stages of discussions in various arbitration matters. After virtual slow down during last year on account of Pandemic the awards are awaited and it is not possible to estimate the full impact of the same on the Company at this stage.

The Governments Make in India initiative will have tremendous opportunity for the Infrastructures for the Company, to name a few - Green Energy, Pradhan Mantri Sahaj Bijlee Har Ghar Yojana, Ujjwala Yojana. Each of these schemes or Yojanas have sizeable budgetary provision which will give ample opportunity for the Infrastructure Sector for growth.

The facilities of the Company with the CDR lenders are presently marked as NPA since June 2017. The Company has been making every effort in settling the outstanding CDR matter.

The Reserve Bank of India had vide its circular no. RBI/2018-19/203 DBR No. BPBC 45/21.04.048/2018-19 dated 7th June, 2019 issued directions for Prudential Framework for Resolution of Stressed Assets which came into immediate effect i.e. 7th June, 2019. To take into consideration the above mentioned circular issued by RBI all the lenders executed ICA in July, 2019.

Pursuant to the execution of the ICA, Lenders appointed M/s. Deloitte Touche Tohmatsu India LLP as Process Advisory (PA) in the resolution process of the Company. Subsequently on the recommendation by Deloitte, the Company signed an engagement letter with Duff and Phelps (D&P) to act as valuers and legal consultants to carry out the valuation of the Company and estimation on the recoverability of arbitration claims of the Company.

The main focus of the Company is to work on valuation of assets and its realization. With the acceptance of the Resolution Plan, the new Management will have ample opportunities considering the vast experience and the qualification of the Company in the sectors of Housing, Power, Irrigation, Water Supply and Hydroelectric Power Structures.

Currently, the Companys main focus is on Resolution Plan and expediting the Arbitration Proceedings. However, due to the ongoing Pandemic situation the same is not fully operational as per the original schedule.

The on-going Kota Cooling Tower was terminated by the Client. It was financially non-viable for the Company. Other projects are on schedule and the Company has not secured any new projects due to financial limitations.


The year under review is a period of 12 (twelve) months commencing from 1st April, 2020 and ending on 31st March, 2021. During the FY under review the turnover of the Company on a Standalone basis stood at Rs 52.84 crores, as compared to Rs 71.71 crores during the previous F.Y ended 31st March, 2020. The Company posted a Net Loss after Tax of Rs 716.85 crores during the FY ended 31st March, 2021, as against a Net Loss after Tax of Rs 1122.56 crores during the previous FY ended 31st March, 2020.

On a Consolidated basis, the turnover of Gammon Group during the year under review stood at Rs 54.52 crores as compared to Rs 86.38 crores for the previous F.Y. ended 31st March, 2020. The Group posted a Net Loss after Tax of Rs 794.72 crores during the F.Y. ended 31st March 2021, as against a Net Loss after Tax of Rs 630.79 crores during the previous F.Y. ended 31st March, 2020. Interest and finance costs continue to be high. The turnover/income is from the residual EPC business, post carve out of the operating business. During the year under review the finance cost which includes the interest costs was Rs 605.96 crores. The loss was primarily due to the provisions made for the Companys funded and non-funded exposure of loans and investments, the details of which is provided in note no. 30 of the Standalone financial statements.


The Construction Industry in general has risk on many accounts such as:

1) Right of Way

2) Geological Condition Variance

3) Law and Order Situation of the Location

4) Lack of Fund Allocation and Subsequent Delay in Collection

5) Time Overrun due to Force majeure conditions

6) Increased working capital Cycle due to above

7) Delay in Dispute Resolutions with the Client etc.

Those risks are mitigated by:

1) Selective biddings

2) Restricted business is limited to in-house expertise

3) Sub-letting the project on back to back basis

4) Restricting the role as a PMC only

5) Early contractual and legal actions for all contract related matters

6) Periodic structured review of the projects on on-going basis to identify the challenges and the risks and to find the possible solution to mitigate the losses.


Post the demerger of the two businesses, the Companys operations have reduced substantially. The Company continues to operate with sceptical employees, with the Company facing retention of employees as a major challenge.


The Company has devised and implemented internal control systems as are required in its business processes. The internal controls have been designed to provide assurance with regard to recording and providing reliable financial and operational information, complying with the applicable statutes, safeguarding assets, executing transactions with proper authorization and ensuring compliance with Corporate policies.

However its implementation and effectiveness in certain areas are affected due to manpower and liquidity issues.


Statements made in the Management Discussions and Analysis describing the Companys objectives, projections, estimates, expectations may be forward looking statement within the meaning of applicable Securities Laws and Regulations. Actual results could differ from those expressed or implied.

Important factors that could make a difference to the Companys operation include economic conditions affecting demand- supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government Regulations, tax law and other statutes and other incidental factors.