Gammon stock rises from Delhi Metro's debris

The collapse of a Delhi Metro bridge stretch on Sunday morning and three recovery cranes toppling over today crushed the contractor — Gammon India’s — scrip in initial trade on the Bombay Stock Exchange today, but the stock recovered dramatically in a falling market to close 2.73 per cent higher.

The scrip of the country’s largest civil engineering construction company collapsed 17.49 per cent to Rs 133 over Friday’s close, after Urban Affairs Minister S Jaipal Reddy told reporters in the morning that the government would not spare anybody, including Gammon India, if the enquiry committee found something amiss.

Six persons were killed and 15 injured when an under-construction bridge of the Delhi Metro collapsed just before dawn on Sunday. Five others were injured at the same site as three cranes and a launching girder toppled over today.

“We followed the highest safety measures and have safety engineers. We are an ISO-certified company and prima facie I don't find any mistake on our part,” Umeash Gupta, vice-president, Gammon India, was quoted by agencies as saying. “The contractor always becomes a soft target. I won't comment more than this. Let's wait for the inquiry committee report.”

The stock went below its book value and that might have attracted long-term investors, helping it regain lost ground, said P Phani Sekhar, a fund manager with Angel Broking. At Rs 133 a share, the price to book value ratio came to about 0.8. However, the stock closed at Rs165.60, giving it a price to book value ratio of 1.19.

Investors are concerned about the long-term profitability of the company. In another accident in September 2007, two people were killed and several injured when pre-cast blocks caved in at the flyover under construction by the company in Hyderabad. A technical committee appointed by the Andhra Pradesh government found negligence on Gammon’s part.

The company reported Rs 3,657 crore in net sales and Rs 140 .4 crore in profit after tax for 2008-09.