Delhi Metro mishap may spell trouble for Gammon

The Delhi Metro mishap on Sunday, killing six people, is not the first instance where construction company Gammon India has come under the scanner for such incidents. In September 2007, the company was held responsible for the scaffolding collapse incident in Hyderabad, which claimed two lives. Sunday?s incident, where a section of an elevated viaduct collapsed, leading to the tragedy, thus comes in less than two years, a cause for concern to the company and its investors.

This concern was reflected in the company?s share prices on Monday. Shares of Gammon Infrastructure Projects Ltd, a subsidiary of Gammon India, which under infrastructure related projects, was down 3.33% on the Bombay Stock Exchange to close at Rs 120.50. Shares of Gammon India, opened lower at Rs 136.50 on Monday against the previous close of Rs 161.20, and soon fell further to Rs 133, down 17.49 %. It, however, managed to make up for the losses and closed trade 2.73% higher at Rs.165.60.

Experts are of the view that how bad the company will be impacted depends on the findings of the enquiry committee which has been formed to look into the issue. ?If the enquiry committee finds negligence in Gammon India?s recent metro rail mishap then the company?s future projects will definitely suffer. In a construction project like Delhi metro rail, there are lots of parties involved in site. Hence, it is too early to say that Gammon India is the only one to be blamed,? commented Anshul Jain, CEO of consultancy firm DTZ India.

Some of the current projects of Gammon include the West Bengal Corridor Project , the Brahmaputra bridge project near Guwahati, the Gorakhpur bypass, the Dahej-Uran pipeline project and the Rampur hydroelectric project. However, there are no indications yet on what Gammon?s future will be on these projects.

Jain also said the issue highlights the need to upgrade safety standards in the country. ?The safety standards in construction across the board need to be upgraded, which is at the moment trailing in comparison to the other Asian countries,? he said. Amitabh Mundhra, director, Simplex Infrastructure, adds, ?It is better for the expert committee to give an opinion on Gammon India?s Delhi metro rail mishap. The point here is that the overall safety standard was not maintained.?

However, Gammon India has said there was no wrong-doing on its part with regard to the mishap. ?We followed the highest safety measures and have safety engineers,? said Umesh Gupta, vice president, Gammon India. ?The contractor always becomes a soft target. I won?t comment more than this. Let?s wait for the inquiry committee report,? he was quoted in an IANS report. Gammon India posted FY 2008-09 revenues of Rs 3,699.4 crore and a profit of Rs 140 crore. Gammon Infrastructure Projects, on the other hand, had FY 2008-09 revenues of Rs 47.9 crore and a profit of Rs 13.6 crore.

Many others echoed the feeling that safety measures have to be beefed in the construction industry. Rajiv Sethi, MD, Gemini Equipments & Rentals, said, ?The construction industry often offers just lip service to safety. Contractors from the field are gathered and told to work on the construction site without maintaining any safety standard. Even the oil industry, working in such hazardous conditions, tends to maintain very high safety record. Such maintenance is required in construction industry as well, at par with other Asian countries.? However, he feels that a couple of mishaps will not have a major impact, if corrective measures are taken at the earliest. ?In case of Gammon India the overall track record is good. However, just one or two mishaps will not have a major impact on the construction sector as a whole. Moreover, even Delhi Metro should not have had pressurised its contractors to complete 100kms of metro rail project in two years, commented Seth.

Gammon India has a long history of big projects and claims its association with what was then the longest river bridge in the world across the Ganges at Patna and the longest railway tunnel in Asia, the Konkan railway project at Ratnagiri in Maharashtra. It has built a host of bridges across the country, including some of the major ones in Mumbai, besides some major jetties, dams, pipelines, flyovers, tunnels, reservoirs, effluent treatment plants and water distribution systems.

Promoter?s of Gammon India has a 31.11% stake in the company, while non-promoter holding in the company is 40.20%. Other investor?s own a 21.35% stake in the company. Abhijit Rajan is the chairman and managing director of the company.