Ban unlikely to hit Gammon IPO

The proposed initial public offering (IPO) of Gammon Infrastructure Projects (GIPL) is unlikely to face any regulatory hurdle following the recent Securities and Exchange Board of India's (Sebi) order.

The Sebi fiat restricted GIPL parent company Gammon India Pvt Ltd (GPL) from raising money from the capital market for next one year.

GIPL, which filed its draft application with the Sebi on March 29, is now expecting the regulator to clear its 'request for qualification' document and wishes to tap the markets as early as possible.

"Sebi in its order has no where mentioned that the restriction over Gammon India, the promoter company of Gammon Infrastructure, halts the IPO," GPL Managing Director Pervez Umrigar said.

He said the order meant Gammon India would not be able to raise any money for one year from the date of the order, as well as it could not sell its holding in GIPL for a period of three years after the GIPL issue was through. However, there was no restriction on GIPL from going to the capital market and raising fresh funds, Umrigar added.

At present, Gammon India holds 82.5 per cent stake in GIPL, which is likely to come down to nearly 20 per cent after the latter's maiden float comes through.

Abhijit Rajan, who holds 29 per cent in Gammon India through as a promoter, will individually have 4.5 per cent in GIPL, post-IPO. Rajan-promoted entities Nikhita Estate Developers Pvt Ltd and Devyani Estates & Properties currently own no shares of GIPL and, hence, will not have any holding in the company.

US-based hedge fund Ochziff too holds 12.5 per cent in GIPL, which the former bought in July 2005 for Rs 122 crore.

Asked whether this would put constraints on Gammon India's future activities, especially at a time when the country's realty sector is growing at a rapid pace, Umrigar said the company with networth of Rs 10 billion was enjoying healthy financial status and had no plans to raise any debt till 2009.

The market regulator barred Gammon India, its promoter Abhijit Rajan, as well as Rajan-promoted other two entities from accessing the capital market for a year for routing the company's funds to subscribe to its Rs 19 crore rights issue in 2001.

Interestingly, along with these four, the Sebi also banned Reliance Silicon India Pvt Ltd, which was the complainant against Gammon for irregularities, from tapping the markets for one year.