Gammon India to start talks for debt recast

The company's stock closed 2.5% lower at Rs 26.5 per share on the BSE on Wednesday

Construction major Gammon India (GIL) will hold talks with lenders to restructure its debt.

"After reviewing the current financial position, the company has decided to initiate discussions with its lenders for realigning the company's debts through the Corporate Debt Restructuring process," the company informed the Bombay Stock Exchange.

The company's stock closed 2.5 per cent lower at Rs 26.5 per share on the BSE on Wednesday. The firm posted a net loss of Rs 261.60 crore in the third quarter ended December 2012 on net sales/income of Rs 1,216.47 crore. Gammon's prominent lenders include Canara Bank, Allahabad Bank, ICICI Bank. Its total long-term rated facilities are over Rs 10,000 crore.

According to a senior public sector banker, Gammon, is hit by payment delays. The company's receivables are stuck with many government agencies and companies.

In September 2012, rating agency CARE downgraded its bank loan facilities to "BBB+" from "A+". The rating revision was driven by the liquidity strain of GIL. It reflected consistently high working capital utilisation levels in the recent past, significant increase in the short-term borrowings in FY12. It exposed the firm to refinancing risks, continued weakening of debt coverage indicators and capital structure of GIL.

The ratings continue to draw strength from established track record of 10 decades of operations with experience spanning the entire spectrum in the construction industry and sizeable and well-diversified order book of GIL across projects and clients.