Gammon sees turnaround in 2-3 years, says CFO

To monetise land bank, order outlook positive

Gammon India, which is currently restructuring its debt, hopes to return to good times in two-three years. Chief Financial Officer Girish Bhat said the economy might see an improvement in the next three to four quarters. “But for the company to return to normalcy, it will take some more time,” he told Business Standard.

To help get the company back on its feet, its bankers are offering it a few relaxations. While the interest rate has been reduced by one per cent, a priority loan to help fund the execution of current orders is also being provided.

Gammon India, which has an orderbook of about Rs 15,000 crore, is confident of bagging more orders. “In the last six months, we won orders worth around Rs 5,000 crore. The outlook for new orders is far better than it was earlier. The margins are also reasonable because we have been selective in quoting for projects,” said Bhat.

The company is also considering shedding non-core assets, including the monetisation of its land banks in three areas---Andheri and Dombivili in suburban Mumbai, and one in Bhopal. Developing these real estate assets could fetch the company about Rs 2,500 crore; this is a part of the CDR conditions. Bhat said the company was willing to sell this land if it received a lucrative proposal.

Recently, the company board considered a resolution to convert Rs 14,814 crore of its debt to equity. The resolution, for shareholder approval will be sought through postal ballot, also has a provision to issue as much as Rs 4,564 crore to lenders.

“We are not converting debt into equity. The CDR package is over a 10-year period and repayments start after that. This right to convert debt into equity is to give comfort and security in case of a default,” said Bhat.

The company went into CDR in June this year, with the infrastructure sector being hit by the downturn in the economy, as spending on the sector fell. Also, the company’s payments worth Rs 2,200 crore are stuck. About 65 per cent of its clients are from the government sector.

On the reasons for restructuring its debt, in its annual report, Gammon India said, “Delays in project execution, caused by frequent interruptions on account of right of way, regional disturbances and government approvals, non-release of retentions on account of delays by customers in implementing their projects and achieving completion, and delays in realisation of arbitration award from clients.”

Government inaction such as slow award of projects, delayed clearances by various agencies, and bureaucratic apathy stunted progress at its sites, Gammon said. This, it claimed, resulted in cost overruns.