It is my pleasure to present to you our Company's performance for the fiscal year 2017-18
The year 2017-18 continued to remain challenging for the Indian construction sector.Even as of Dec 2018 11.8 trillion (almost 11% of projects under implementation) ofprojects had status Implementation Stalled' as per CMIE. As you know the policyparalysis and issues in land acquisition stalled key projects across all sectors ofinfrastructure over last several years. Stalled and severely delayed projects led to delayin payments payments being withheld for no fault of contractors.
Further clients did not honor arbitration awards awarded in favour of your Company andlitigation went on for years. Contractors who had borrowed from banks to mobilizeresources faced high interest costs declining profitability due to massive cost overrunsand extreme liquidity stress due to unavailability of credit. This has impacted all majorconstruction and infrastructure companies including yours. The market conditions have notimproved significantly.
Gammon India Limited is the first and few companies to successfully implement and exitSDR under which we have managed to resolve approx. 70% of lenders exposure. We continue tostrive vigorously to meet our debt obligations and to resolve the remaining 30% of thedebt. We are exploring various strategic and tactical options to reduce the debt burdenand improve financial viability of the business.
However with the release of RBI circular of February 2018 all available mechanismsand schemes for resolution of stressed assets such as SDR S4A were withdrawn. Theresulting impact of tightening of credit following resolution mechanism enforced by RBIto reduce NPAs across sectors in banks slowdown in decision making process and lack ofcollaboration among lender consortium and recent negativity surrounding a couple of highlypublicized cases of bank fraud have adversely impacted resolution of stressed assetsespecially in infrastructure.
However Government at Central and State levels have undertaken various positive stepsincluding revival of stalled projects and some sectors like road have seen large number ofproject awards where capital expenditure of 1.22 lakh crore has been earmarked forexpansion of National Highways. Some of the measures taken by Government include:
Increased spending in all areas of infrastructure: In Union Budget FY18-19 thetotal infrastructure outlay was increased by almost 21% to 5.97 lakh crore with all timehigh allocations made to roads bridges and railways ( 148528 crore).
We have started seeing the effects of implementation of Arbitration andConciliation (Amendment) Act 2015 which facilitates faster and time bound decisionmaking in the arbitration process. We have diligently followed up on our claims under theaegis of amended Arbitration Act and consequently GIL won awards worth 60 crores in FY2018and 175 crores so far in 2019. We were also able to collect almost 75 crores in last 2years against arbitration awards. We expect to receive a significant amount of funds incoming years against existing awards and pending arbitration cases.
During the year under review the Turnover of the Company on a standalone basis stood at' 233.43 crores as compared to ' 712.02 crores during the previous 12 month period ended31st March 2017. The Company posted a Net Loss after Tax of ' 1981.30 crores during theperiod ended 31st March 2018 as against a Net loss after Tax of ' 1659.92 crores duringthe previous period ended 31st March 2017.
On a Consolidated basis the Turnover of Gammon Group during the period under reviewstood at ' 645.41 crores as compared to ' 1483.92 crores for the previous 12 month periodended 31st March 2017. The Group posted a Net Loss after Tax of '1621.45 crores duringthe period ended 31st March 2018 as against a Net Loss after Tax of ' 1153.77 croresduring the previous 12 month period ended 31st March 2017.
In its overseas operations the Company has posted a turnaround in Group Sofinter inItaly with Sofinter Group reporting a revenue of ' 2681 crores and a profit after tax of' 16.23 crores. However the operation in its marginal oil-field in Ecuador continues tobe under extreme stress due to lack of financial support needed to fund capexinterventions due to delays in decision making by the lenders.
We shall continue to focus on monetization of non-core assets and increase liquidity ofthe company. During the year the Company sold land in Dombivali held by its subsidiaryMetropolitan Infrahousing Pvt. Ltd. to repay ' 286 crores debt to lenders who held firstcharge on the land.
Gammon is actively working with lenders to design another resolution mechanism underthe Sashakt' plan for resolution of stressed assets. We are in discussions with afinancial investor who has submitted a proposal to lenders to resolve a significantportion of outstanding debt by reviving Gammon India's EPC operations via equity infusionand monetization of company's claims an real estate holdings. The Company has over ' 3000crores of outstanding arbitration claims which the new investor will take to conclusion torecover atleast ' 800 crores with possibility to collect 75% against a bank guarantee incase further the award is appealed in higher courts. The Company is actively engaging thelender consortium to obtain a buy-in for the proposal to initiate the steps required fordebt resolution. We hope to obtain the required approvals from lender consortium this yearand begin the journey for revival of company's EPC business wherein we shall once againaspire to assume leadership position.
I would like to extend my heartfelt gratitude to all our stakeholders our lenders andbankers suppliers employees and shareholders for their continued support and the faithreposed in us.
We look forward to better times ahead and will continue to focus on achieving ourstated goals with sincerity and dedication.
With best wishes
Abhijit Rajan Chairman