In a filing to the BSE on Monday, Gammon said the board of directors will consider various options of restructuring of the Gammon Group at a meeting to be held on April 3.
The move forms part of the recast package that was approved by the CDR cell in June last year. The stressed civil contractor got R13,500 crore of debt restructuring approved, which is the largest CDR package approved in FY14.
Apart from a long repayment tenure of 10 years and a reduction in interest rate on the loan amount, the restructuring proposal said the company will be reducing its stake in subsidiary companies. Girish Bhat, chief financial officer, Gammon India, had told FE last year that the company is progressing on divesting partial stake in an Italian subsidiary without divulging much details. He did not answer to the repeated calls made for seeking comments for this story.
An analyst tracking the company in a domestic brokerage told Fe, The company hopes to recover at least half or around euro 50 million through sale of stake in Italian subsidiary, as there have been no significant operational gains from there.
In 2008, Gammon India made three acquisitions in the Italian market, investing close to euro 100 million in buying these companies with presence mostly in power equipment segment. In June 2008, Gammon bought a majority stake (75%) in Italian turbine maker Franco Tosi Meccanica for euro 40 million and a 50% stake in power sector services firm Sadelmi for euro 7.5 million. In September of 2008, Gammon made another acquisition and bought 50% stake in Sofinter Group, the holding company of Ansaldo Caldaie, a significant power equipment supplier in Italy for euro 50 million.
According to a 2012-2013 annual report of Gammon India, Sofinter Group posted a net profit of euro 2,369,646 on consolidated revenues of euro 263 million as on December 31, 2012.
However, Franco Tosi Meccanica SPA has been going through a rough patch. During 2012, the business plan of Franco Tosi Meccanica SpA (FTM) suffered due to the political and financial crises in Italy and poor market conditions in general for power equipment manufacturers. The company has slipped on commitments to its suppliers and creditors, who have been adopting different legal means to recover their dues. Concurrently, in spite of the healthy order book of over euro 130 million, due to the non-cooperation from the banks and creditors; project deliveries began to slip, which considerably squeezed the companys topline and also resulted in substantial losses with the consequent erosion of net worth by more than 33% due to which the corporate capital has fallen below the minimum required by Italian law," Gammon India's 2012-2013 annual report notes.
Meanwhile, back home, sale of partial stake of up to 24% may be on the cards in the company's profitable infrastructure arm Gammon Infrastructure. On March 5, 2013, Gammon had clarified to the stock exchanges that while it remains its general intent and thought, the company has not sought formal approval of the board nor has mandated any bank or advisor on the divestment plans.
The board may also take up Gammon India's proposal to monetise around 200 acres of land, which is expected to fetch R2,000 crore to the company.