Gammon India

The Directors have pleasure in presenting their 86th Annual Report
 together with the Audited Accounts of the Company for the year ended
 31st March, 2008.
 
 1.  FINANCIAL PERFORMANCE:
 
                                           Current Year   Previous Year
                                           2007-08        2006-07
                                           Rs. in Crores  Rs in Crores
 
 Depreciation and Taxation amounted to:    185.55         178.28
 
 From which is to be deducted:
 Depreciation                               46.21          35.22
 
 Profit Before Taxation                    139.34         143.06
 
 Provision for Taxation:
 
 * Current Tax                              50.12          40.10
 
 * Deferred Tax                             (0.75)          3.40
 
 * Fringe Benefit Tax                        1.65           1.20
 
                                            51.02          44.70
 
 Profit After Tax                           88.32          98.36
 
 Add/(Less)
 Excess/(Short) Provision of taxation 
 for earlier years                          (2.19)        (53.88)
 
 Net Profit After Prior Year Tax Charge     86.13          44.48
 
 Profit Brought Forward from last year     111.58         102.82
 
 Profit Available For Appropriation        197.71         147.30
 
 Less:
 
 Amount Transferred to General Reserve     (14.95)       (10.00)
 
 Amount Transferred from Debenture
 Redemption Reserve                         13.75             - 
 
 Amount Transferred to Debenture 
 Redemption Reserve                        (11.51)       (10.71)
 
 Amount Transferred to Special 
 Contingency Reserve                       (20.00)       (10.00)
 
 Proposed Dividend                          (4.34)        (0.87)
 
 Interim Dividend                               -         (3.50)
 
 Tax on Dividend                            (0.74)        (0.64)
 
                                           (37.79)       (35.72)
 
 Balance Carried to Balance Sheet          159.92        111.58
 
 Your Company achieved a Turnover of Rs. 2,340.84 Crores (excluding
 Companys share of turnover in Joint Venture aggregating to Rs. 172.90
 Crores) during the year ended 31st March, 2008 as compared to a
 Turnover of Rs. 1,844.84 Crores (excluding Companys share of turnover
 in Joint Venture aggregating to Rs. 239.49 Crores) for the previous
 year ended 31st March, 2007 thereby registering an increase of 26.89%
 on annualized basis.
 
 The Net Profit of the Company after tax increased from Rs. 44.48 Crores
 in the previous year to Rs. 86.13 Crores during the year under review.
 
 2.  DIVIDEND:
 
 The Board of Directors at its meeting held on 30th June, 2008 has,
 subject to the shareholders approval recommended a final dividend of
 25% (Rs. 0.50 per share of Rs. 2/- each) for the year 2008. The total
 dividend for the year under review works out to Rs. 4.34 Crores.
 Dividend Distribution Tax aggregates to Rs. 0.74 Crores.
 
 3.  FINANCE:
 
 Your company has not raised any funds from the capital markets either
 by way of issue of equity/ADRs/GDRs.  However to meet its working
 capital requirements it has obtained financial assistance from its
 consortium bankers.
 
 As on 31st March, 2008, total amount outstanding towards issue of
 Non-Convertible Debentures on private placement basis to banks and
 financial institutions stood at Rs. 126 Crores. CARE has assigned AA+
 rating for the same.
 
 The following credit ratings from CARE continue:
 
 (i) PR1 + for short-term commercial paper of Rs. 225 Crores
 
 (ii) AA+ for Non-Convertible Debentures of Rs. 300 Crores
 
 (iii) CARE AA+ for Long Term Bank Facilities and PR1+ for Short Term
 Bank Facilities aggregating to Rs. 3,000 Crore.
 
 The proceeds of debentures were utilised for the purposes for which
 they were raised.
 
 Capital expenditure on plant and machinery during the year amounted to
 Rs. 111.89 Crores which was financed from internal accruals, short term
 funding and External Commercial Borrowings.
 
 Gammon Infrastructure Projects Limited (subsidiary of Gammon India
 Limited) became a listed entity with the Initial Public Offering
 comprising of 1,65,50,000 Equity Shares for a price of Rs. 167 per
 share (including premium of Rs. 157). The issue was oversubscribed by
 3.42 times. It raised an amount of Rs. 276.39 Crores through the public
 issue.
 
 4.  FIXED DEPOSITS:
 
 Your Company did not invite or accept deposits from the public during
 the year under review. 158 deposits (pertaining to previous years)
 aggregating to Rs. 0.18 Crores remained unclaimed as on 31st March,
 2008.
 
 5.  DEPOSITORY MECHANISM:
 
 As the members are aware, the Companys shares are compulsorily
 tradable in electronic form. As on March 31, 2008, almost 97.04% of the
 Companys total share capital representing 8,48,81,247 shares were in
 dematerialized form. In view of the numerous advantages offered by the
 Depository system, members holding shares in physical mode are advised
 to avail of the facility of dematerialization with either of the
 Depositories.
 
 6.  OVERSEAS EXPANSION:
 
 During the year under review, your Company has already undertaken
 several projects in the Middle-East and South Africa and other
 countries and is seeking out new business opportunities overseas. Your
 Company has successfully completed an Independent Water and Power
 Project at Sohar - Water Transmission System Project for Ministry of
 Housing Electricity and Water, Sultanate of Oman - the Single largest
 water transmission project ever awarded by the Ministry.
 
 In continuing with its overseas ventures, your Company emerged as a
 successful lowest-bidder for Civil and site development work at
 Wonji/Shoa Sugar Factory, Ethiopia. The Company set up two special
 purpose vehicle companies in Netherlands viz. R Van Eerd
 Beheersmaatschappij B.V. and Gammon Holdings B.V. as overseas step-down
 subsidiaries for following acquisitions:
 
 Sadelmi S.p.A, an Italian Company engaged in the business of balance of
 plant for the Power Sector.
 
 Franco Tosi Mecannica S.p.A an Italian Company engaged in the business
 of design, manufacture and servicing of Industrial Turbines, Steam
 Turbines for Power Generation and Hydraulic Turbines.
 
 Your Directors are of the opinion that since the activities of these
 companies are complementary and in some cases similar to that of the
 Company, these acquisitions will lead to synergies in operations and
 help the Company gain a foothold in new areas of Infrastructure
 development.
 
 The acquisition of these Companies will help your Company to become
 more global in its outlook and reach.
 
 7.  EMPLOYEES STOCK OPTION SCHEME:
 
 With the objective of attracting and retaining efficient employees and
 rewarding them for their contribution to the Companys growth, your
 Company has with your approval, introduced Gammon India Limited -
 Employees Stock Option Scheme 2007 for issue of 20,00,000 stock options
 to eligible employees of the Company and its subsidiaries. The Board
 has constituted an ESOP Compensation Committee which has been entrusted
 with the responsibility of administering the Scheme. In pursuance
 thereof, the Committee has granted and issued 15,00,000 options on 15th
 May, 2008 at a price of Rs. 395.75 per share as per Securities and
 Exchange Board of India (Employee Stock Option Scheme and Employees
 Stock Purchase Scheme) Guidelines, 1999. Details of the Options granted
 under ESOR as also the disclosure in compliance with Clause 12 of the
 Securities and Exchange Board of India (Employee Stock Option Scheme
 and Employees Stock Purchase Scheme) Guidelines, 1999, are set out in
 Annexure II to this report.
 
 8.  BUSINESS PROSPECTS:
 
 The infrastructure industry has been growing on a massive scale,
 registering an impressive growth of almost 8.3% during the financial
 year 2007-08. New Projects in sectors such as Power, Oil, Gas, Ports,
 Roads, Railways, Urban Infrastructure and Industrial Projects (Steel,
 Aluminum, and Cement Plants) contribute over 50% of the revenues of the
 Indian Construction Industry. Given the number of large infrastructure
 projects on the anvil, the construction sector is poised for a big
 expansion. As most of the infrastructure sectors have lined up
 ambitious plans, the construction sector can certainly be expected to
 be a major beneficiary. Your company being one of the major players in
 the construction industry has entered into the field of Dedicated
 Railway Freight Corridors announced by the Ministry of Railway valued
 at Rs. 1,000 Crores and also for Civil works of the Aluminium plant at
 Jharsuguda, Orissa. Your Companys performance, business outlook and
 future prospects has been detailed in the Management Discussion and
 Analysis Report.
 
 9.  INVESTMENTS IN INFRASTRUCTURE ACTIVITIES:
 
 Your Company participates in the development of infrastructure projects
 in India by undertaking projects on a Public Private Partnership
 (PPP) basis through its subsidiary Gammon Infrastructure Projects
 Limited (GIPL). GIPL is among the first company in India to be modeled
 as an infrastructure development company, undertaking projects on a PPP
 basis. It undertakes and develops roads, bridges, ports, hydroelectric,
 power and biomass power projects. In addition it also undertakes,
 projects in various sectors such as - urban infrastructure, airports,
 mass rapid transit systems, power transmission lines and SEZs. It also
 offers services in other areas of project development, such as project
 advisory services, project funding and operations and maintenance
 activities. Presently, the infrastructure project development business
 includes fourteen projects - housed under separate special purpose
 vehicle companies. Of these, four are already in the operations phase
 and the other ten in various stages of development.
 
 10. SUBSIDIARY COMPANIES:
 
 At the commencement of the year the Company had 13 (Thirteen)
 subsidiaries. It has further incorporated the following subsidiaries
 during the year under review:
 
 (1) Gammon International FZE - UAE
 
 (2) R Van Eerd Beheersmaatschappij B.V. - Netherlands
 
 (3) Gammon International L.L.C. - Oman
 
 (4) Tidong Hydro Power Limited
 
 (5) Gammon Logistics Limited
 
 (6) Haryana Biomass Power Limited
 
 In addition to the above the following companies have become step down
 subsidiaries of your Company:
 
 (1) Gammon Holdings B.V. - Netherlands
 
 (2) Gammon International B.V. - Netherlands
 
 (3) Deepmala Infrastructure Private Limited
 
 A Statement pursuant to Section 212 of the Companies Act, 1956
 containing details of the subsidiaries of the Company form part of the
 Annual Report.
 
 Your Company has applied to the Central Government under Section 212(8)
 of the Companies Act, 1956 seeking an exemption from attaching copies
 of the Balance Sheet, Profit and Loss Account, Directors Report and
 Auditors Report of its subsidiary Companies.
 
 The Annual Accounts of subsidiary Companies and the detailed related
 information are available for inspection by the shareholders at the
 registered office of the Company.
 
 11.  REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND
 ANALYSIS:
 
 Report on Corporate Governance and Management Discussion and Analysis
 statement will form part of Annual Report.
 
 12.  DIRECTORS:
 
 Mr. Himanshu Parikh, Whole-time Director of the Company, whose term
 ended on 30th April, 2008, was re-appointed as the Whole-time Director
 of the Company for a further period of 5 (five) years w.e.f. 1st May,
 2008, subject to the approval of the shareholders at the ensuing Annual
 General Meeting.
 
 Mr. S. K. Guha Thakurta, Director of the Company expired on 29th
 September, 2007. Your Directors would like to place on record their
 appreciation for the valuable services rendered by Mr. Thakurta during
 his tenure as a Director.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Articles of Association of the Company, Mr. Peter Gammon and Dr.
 Naushad Forbes retire by rotation at the ensuing Annual General Meeting
 and being eligible, offer themselves for re-appointment.
 
 Mr. Jagdish Sheth and Mrs. Urvashi Saxena were appointed as Additional
 Directors w.e.f. 29th September, 2007 and 31s January, 2008
 respectively.
 
 Mr. Jagdish Sheth was the Chairman and Managing Director of the
 Shipping Corporation of India Ltd. and has been associated with the
 Shipping Industry in India for the last 50 years.
 
 Mrs. Urvashi Saxena was the former Chairperson of the Income Tax
 Settlement Commission, New-Delhi and the Former Chief Commissioner of
 Income Tax, Mumbai.
 
 Brief resumes of these directors are included in the notes to the
 notice convening the Annual General Meeting which includes the proposal
 for appointment and re-appointment of the aforementioned Directors.
 
 13.  DIRECTORS RESPONSIBILITY STATEMENT:
 
 Pursuant to Section 217 (2AA) of the Companies (Amendment) Act, 2000,
 the Directors confirm that:
 
 1.  The applicable accounting standards have been followed by the
 Company in preparation of the annual accounts for the year ended 31st
 March, 2008;
 
 2.  The Directors have selected accounting policies and applied them
 consistently and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company at the end of the year ended 31st March, 2008; and of the
 Profit of the Company for the said financial year ended 31st March,
 2008;
 
 3.  The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 4.  The annual accounts are prepared on a going concern basis.
 
 14.  HEALTH, SAFETY & ENVIRONMENT:
 
 We at Gammon believe that safety of our employees is of great
 importance and we rank it at par with quality and progress of work. The
 commitment of providing a safe and healthy working environment is being
 achieved by proactive planning during the inception stage, providing
 necessary safety gadgets during the execution stage and constant
 upgradation of our safety standards as per the rapid changing
 technology in construction.
 
 During the year under review your Company has been successful in;
 
 * Maintaining a good safety record with up to 50% decrease in the
 accident frequency rate and accident incidence rate.
 
 * Implementation of safety action plan at project sites through
 effective training at all levels and promotional activities.
 
 * Ensuring good health of our employees and spreading awareness at
 project sites by organizing health check up camps and HIV/AIDS
 awareness programmes.
 
 * Receiving appreciation from some of our esteemed clients for project
 team achievements like completion of seven million safe man-hours and
 excellence in safety.
 
 * Achievement of ISO: 14001-2004 EMS and OHSA: 18001-1999 by our BC-12
 & 13, Delhi Metro Rail Corporation project site.
 
 * Publishing a safety hand book titled The Bad and Good of Safety.
 This book is an answer to the regular complaint that construction
 workers are illiterate. The book gives pictorial safety education.
 
 15.  RESEARCH & DEVELOPMENT:
 
 Indian construction industry is passing through evolutionary phase and
 to survive this era there is a need to have strong Research and
 Development quest to develop modern techniques to accelerate the
 operational skills and to meet the challenges of construction
 activities e.g.
 
 * Scheme is developed to launch the segments using span by span
 technique for Kosi River Bridge. Maximum weight of segment is about 90
 MT. Specially developed Camel gantry will be used to feed the segments.
 Launching girder fabricated with high tensile steel plates will be used
 for erection of segments.
 
 * Spud Barge of size 18m x 22m having capacity to carry 100 MT on
 crawler crane for piling and erection works in mid sea is being
 developed for Mumbai Port Trust.
 
 * Various such techniques have been developed & sustained efforts are
 being made to improve upon existing techniques and development of new
 ones.
 
 16.  AUDITORS:
 
 The existing Statutory Auditors M/s. Natvarlal Vepari & Co., Chartered
 Accountants, of the Company retire at the ensuing Annual General
 Meeting and are eligible for re-appointment. A certificate to the
 effect that their appointment, if made, will be within the prescribed
 limits under Section 224(1 B) of the Companies Act, 1956 has been
 received from them.
 
 The Board has recommended the appointment of M/s. Natvarlal Vepari &
 Co., Chartered Accountants, as Statutory Auditors of the Company and
 also as the Branch Auditors, Oman Branch and any other branch.  subject
 to members approval.
 
 17.  AUDITORSREPORT:
 
 In the opinion of the Directors, the notes to accounts are
 self-explanatory and adequately explain the matters, which are dealt
 within the Auditors Report.
 
 18.  PARTICULARS OF EMPLOYEES:
 
 The statement pursuant to the provisions of Section 217(2A) of the
 Companies Act, 1956, read with the Companies (Particulars of Employees)
 Rules, 1975 is annexed hereto this report (Annexure I).
 
 19.  PARTICULARS UNDER COMPANIES {DISCLOSURE OF PARTICULARS IN THE
 REPORT OF THE BOARD OF DIRECTORS) RULES, 1988:
 
 A.  Conservation of Energy:
 
 The conservation of energy in all the possible areas is undertaken as
 an important means of achieving cost reduction. Savings in electricity,
 fuel and power consumption receive due attention of the management on a
 continuous basis.
 
 B.  Technology Absorption:
 
 Timely Completion of the projects as well as meeting the budgetary
 requirements are the two critical areas where different techniques help
 to a great extent. Many innovative techniques have been developed and
 put to effective use in the past and the efforts to develop new
 techniques continue unabated.
 
 C.  Foreign Exchange earnings and outgo:
 
 Total foreign exchange used and earned during the year.
 
                                (Rupees in Crores)
                                 Current          Previous
                                 Period           Period
 
 Foreign Exchange used            68.17           120.30
 
 Foreign Exchange Earned          12.67            40.92
 
 20. ACKNOWLEDGMENTS:
 
 Your Directors thank all its valued customers and various Government,
 Semi-Government and Local Authorities, suppliers and other business
 associates. Your Directors appreciate continued support from Banks and
 Financial Institutions and look forward to their co-operation in the
 future.
 
 Your Directors place on record their appreciation for the dedicated
 efforts put in by Gammonites at all levels and wish to thank the
 Shareholders and Deposit holders for their unstinted support and
 co-operation.
 
                          For and on behalf of the Board of Directors
 
                                         ABHIJIT RAJAN
                                  Chairman & Managing Director
 
 Place : Mumbai
 Dated : 30th June, 2008