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Gammon Infrastructure Projects

BSE: 532959|NSE: GAMMNINFRA|ISIN: INE181G01025|SECTOR: Construction & Contracting - Civil
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Chairman's Speech (Gammon Infrastructure Projects) Year : Mar '18

Dear Shareholders,

It gives me great pleasure to connect with you through the Annual Report. FY 2018 was indeed a challenging year, as the industry continued experiencing multiple headwinds, including persistent project delays and higher borrowing costs. These restraints wedged the execution of ongoing projects within the industry significantly, and your Company’s experience was no exception.

It is an undeniable fact that India needs substantial amounts of new infrastructure, given its growing ambitions and vast areas of underdeveloped regions. Past records indicate a snail’s pace in infrastructure development. There are several initiatives to change this in play, but the main question is to see how well the execution of our planned projects pans out. Our journey till date has been very challenging. However, I am confident that our core values will provide us with adequate strength to face them. Your company has been passing through a financial turbulence that is part and parcel of the overall sluggishness in the sector, and the mismatch of cashflows has resulted in the erosion of our profitability.

The key challenges surrounding the business continue to persist. The slow pace of execution of existing projects due to several regulatory issues and delay in settlement of contractual issues, continue to persist. This has resulted in the elongated working capital cycles with creating difficulty in debt servicing. Further, the ballooning financial costs have impaired financial liquidity. Given the financial stress in the industry, the infrastructure sector is witnessing limited support from the financial institutions and banks.

Delay in execution of projects and cost overruns on account of delayed decision of resolution, external environment and delay in decision-making process, the issues faced by the road, ports and power projects of the Company remained unresolved. These led to delays in the progress of more than half dozen of our projects for reasons beyond the management control. Disputes involving large amounts of invested capital have a slow-paced redressal. To further aggravate the Company’s financial liquidity, arbitration awards issued in favour of the Company are currently in appeal filed by the clients.

The Company has been successful in finding a way forward for its Offshore Container Terminal (OCT) Project (the Port Project) developed by its subsidiary namely; Indira Container Terminal Private Limited (ICTPL) with the assistance of Mumbai Port Trust (MbPT) and the Ministry of Shipping (MoS) and the issues related to the Port Project should be resolved in the near term.

I am pleased to inform that your company has taken some positive initiatives in sourcing prospective and reputed investors and/or strategic partners for 2 (two) of its operational road projects developed by its subsidiaries namely; Patna Highway Projects Limited (PHPL) and Rajahmundry Godavari Bridge Limited (RGBL). The investors/strategic partners have shown interest in infusing fresh capital and refinancing the existing debt of the subsidiaries, which would help these projects in achieving sustainability in the near future.

The Company has successfully completed the arbitration process under the Society for Affordable Redressal of Disputes (SAROD) in one of its road project companies, namely; Patna Buxar Highways Limited (PBHL), which was sold in March 2016.

The positive response received from Bankers for funding road projects, the funds expected from Arbitration proceedings and successful resolution plan in one of the SPVs will help the operational projects for further development in operational sectors.

Fortunately, with time, the Indian infrastructure industry is beginning to witness multiple changes at a breakneck pace.

In the last few years, the government has made its intent for infrastructure development clear, and is investing heavily for developing a first world country of the future. With a resolve to accelerate the creation of core infrastructure, the country is striving to remove both construction and operational bottlenecks, with a sound policy framework.

I am hopeful that the government will take all the correct initiatives in the coming fiscal year to rectify the situation and stimulate the recovery process for the sector. However, as many of these steps will take time to yield results, I suspect that we need to brace ourselves for another tough year for the industry.

I would like to thank our dedicated management team and skilled workforce for helping us succeed in sustaining resilience. I also express my sincere gratitude to my colleagues on the Board and to all the shareholders for their patience.

Sincerely,

Sushil Chandra Tripathi

Chairman

Source : Dion Global Solutions Limited
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