Lenders to bring in investors for Gammon India

To recover Rs 10,000-crore debt; EY advisor for the exercise

As a step to recover Rs 10,000 crore of dues, lenders to Gammon India will invoke the rules for strategic debt restructuring (SDR), leading to finding new partners for the company.  

Gammon informed the stock exchanges on Monday about the lenders’ decision in this regard, at a meeting of the Corporate Debt Restructuring empowered group.

A senior public sector bank executive told this newspaper: “The SDR is one element in the entire recast activity. The company will be split into three separate units, comprising: a) engineering, procurement and construction; b) transmission and distribution; and c) residual business. The SDR will be invoked in the third company — managing the residual business, which will have the real estate assets in the Mumbai Metropolitan Region.”

The official, associated with the recast exercise, said the invocation of SDR gives lenders 18 months to recover their money by selling the assets. “During this period the loans would remain standard (on the balance sheet classification),” he added.

With the move, existing promoter Abhijit Rajan will make way for the joint venture partner in the third company. The bankers have the choice to convert part of the debt into equity, which could be sold to the new venture partner. EY is advising on the transaction.

“It is too early to tell when the entire exercise would be completed and lenders recover their dues. The expectation is that the real estate arm would be able to generate substantial cash flows to meet the repayment obligations. The lenders would hold not more than 25 per cent stake in the T&D and the EPC businesses,’’ the official said.

The company in August had already informed the stock exchanges that it would split its EPC and T&D businesses from itself, transferring these to Gammon Retail Infrastructure and Transrail Lighting, its two subsidiaries, respectively. This was aimed at allowing the businesses to run independently of each other, bringing strategic investors and de-leveraging its balance sheet.

Subsequently, the company last week  approved the transfer of the civil EPC business to Gammon Retail Infrastructure. This comprises roads, hydro power, nuclear power, tunnels, bridges, buildings, cooling towers, chimneys and others as a going concern, including all the properties, rights and powers, and all debts, liabilities, duties and obligations pertaining to this business.

LOBBYING HARD

• Gammon India will be split into 3 separate units — engineering, procurement and construction; transmission and distribution; and residual business
• SDR will be invoked in the third unit — managing residual business
• Invocation of SDR gives lenders 18 months to recover debt
• Existing promoter Abhijit Rajan will make way for joint venture partner in the third unit
• Bankers have the choice to convert part of debt into equity, which could be sold to the new venture partner