The financial period under consideration covers a span of 18-months ending 31st March2016. During this period the construction industry in India continues to be plagued byinadequate capital slow and delayed projects sticky receivables lack of speedy andproper dispute resolution mechanism slow moving or stalled projects bureaucratic delaysin awarding projects delays in land acquisition and higher working capital cycles andhighly leveraged balance sheets. Almost all the players in the industry are affected bythe slow-down. Though 2015 continued to remain challenging for the Indian constructionsector the industry has been on a revival path supported by the governments avowedseriousness about the infrastructure development to accelerate economic growth. Henceeven in a fiscally challenged situation the Union Budget outlay for the infrastructuresector which is the main supporter of construction industry has been sharply increasedfrom Rs. 163885 crores in 2015-16 (revised Budget estimates) to Rs. 202121 crores for2016-17 (Budget estimates) indicating a growth of over 23%. The budgetary allocation isbeing leveraged many times over indicating a new line of thinking that shouldprogressively ensure off-budgetary funding and financial support to sustain thedevelopmental lifecycle of the infra projects. The air of confidence is slowly returningto the countrys infrastructure and construction sectors and is quite visible in thenumber of broad-based sectoral developments announced in the recent months. Thecountrys roads sector is poised for a big leap with the government anticipating theaward of 25000-km of highway projects during the current year consistent with the overalltarget of achieving 30-km of road construction per day. The Ujwal Discom Assurance Yojana(UDAY) and the ambitious target of reaching 100 GW of solar power by 2021 through the
Jawaharlal Nehru National Solar Mission augur well for the countrys renewableenergy scenario. With ports and airports forming a significant part of the cycle ofpriorities investments in these sectors are bound to pickup as the country moves forward.The Indian Railways is poised to be a big investment driver with its own Five-Year Plan.Investments in Railways will have a dramatic impact. Investments in rural roads ruralelectrification irrigation and rural housing could be transformational for Indiasvast rural landscape. The government also plans to develop coastal economic regions aspart of plans to revive the countrys Sagarmala project which will give a boost tothe port sector.
The Smart City project and consistent investments in upgrading transportation andsocial infrastructure is expected to rejuvenate urban space.
However the recovery of the construction sector will depend upon the speedyimplementation of the plans and addressing issues at macro as well as the micro level.
During the 18 months period ended 31st March 2016 the Turnover of the Company on astandalone basis stood at Rs. 6077 crores as compared to Rs. 2909 crores during theprevious 9 month period ended 30th September 2014. The Company posted a Net Profit afterTax of Rs. 14.64 crores during the period ended 31st March 2016 as against a Net profitafter Tax of Rs. 67.80 crores during the previous period ended 30th September 2014.
On a Consolidated basis the Turnover of Gammon Group during the period under reviewstood at Rs. 7949 crores as compared to Rs. 3763 crores for the previous 9 month periodended 30th September 2014. The Group posted a Net Loss after Tax of Rs. 502.51 croresduring the period ended 31st March 2016 as against a Net Loss after Tax of Rs. 775.32crores during the previous 9 month period ended 30th September 2014 The Company continuedto reel under financial stress. Though the Corporate Debt Restructuring in June 2013 gavethe Company the much needed breather to streamline its operations subsequently themounting interest burden non availability of timely finance and subsequent delays inexecution of projects apart from low order intake eroded profits. The working capitalcycle of the Company was also stretched due to non-achievement of milestones and elongatedrecovery of receivables. Monetization of assets as envisaged under the CDR package hasbeen slow due to the slowdown in economies both in India and overseas.
The severe liquidity crunch was sought to be arrested by the invocation of StrategicDebt Restructuring in the Company by the lenders with effective date of 17th November2015. Sixteen lenders have converted part of their outstanding debts aggregating to Rs.277.12 crore into equity shares acquiring 63.07% of the Companys equity capital.
Building Future Possibilities
Carving out of T&D business and Civil EPC business
The Company as part of its revival plan carved out Transmission & Distributionbusiness in two phases viz a slump sale through process of Business Transfer Agreement(BTA) and Scheme of Arrangement. In the first phase two manufacturing facilities viz theconductor division at Silvassa and the Tower manufacturing facility at Deoli have beentransferred to Transrail Lighting Limited (TLL) effective from 1st January 2016 and aScheme of Arrangement has been filed in the Mumbai High Court for transfer of the EPCBusiness relating to the transmission and distribution sector.The Investor AjanmaHoldings Private Limited (formerly Bilav Software Private Limited) acquired a stake of 75%in TLL at a cost of Rs. 2.33 crores from the Company. The investor will further invest Rs.47.70 crores approximately in TLL. As a part of proposal of carving out of theT&Dbusiness CDR Debt aggregating to Rs. 3580 crores (both funded and non-funded) has beentransferred to TLL.
The Company has also proposed to carve out its Civil EPC business in two phases to itswholly owned subsidiary Gammon Engineers and Contractors Pvt Ltd ("GEPL") by wayof slump sale on a going concern basis effective from 1st July 2016. GP Group ofThailand the Investor shall be investing Rs. 150 crores in the EPC Business beingcarved out in GEPL in tranches. As a part of the proposal of carving out of the EPCBusiness CDR Debt of approximately Rs. 6512 crores (both funded and non-funded) will betransferred to GEPL. The EPC carve out shall be subject to approval of members lendersand the Court and other regulatory approvals. We will continue to execute the EPC projectsretained in the Company with reduced debt levels. In parallel we are also looking tomonetize our non-core assets including our investments in domestic and overseassubsidiaries that will not only consolidate management focus but also create debtreduction and liquidity avenues. We are streamlining our business processes andadditionally we are also engaging in active discussions with clients for overcomingbottlenecks in the timely execution of existing projects to enhance cash flows and alsolook to augment the order book that stood at Rs. 11000 crores at the close of March2016. With these steps we are confident of initiating a sustainable growth across ourbusinesses.
I extend my gratitude to all our stakeholders our lenders partners employees andshareholders for their continued support and the faith reposed in us during these toughtimes. We look forward to better times ahead and will focus on achieving our stated goalswith sincerity and dedication. With best wishes
Chairman & Managing Director