Gammon Infrastructure Projects has defaulted on its loan obligations to lenders, KK Mohanty, managing director of the company, confirmed to FE on the sidelines of the firm’s annual general meeting on Tuesday. The debt relates to the Mumbai Port Trust’s (MPT) container terminal project.
“We stopped paying the principal amount in the January-March quarter but continue to meet interest payments,” the managing director said, adding that the defaults had occurred due to cost overruns at the container project after the MPT failed to fulfil certain conditions.
Mohanty said that to the company’s knowledge the account has so far not been classified as a non-performing asset. “Canara Bank, which leads the consortium of lenders, has recommended the rescheduling of the R1,500-crore outstandings,” he added.
Canara Bank officials were not immediately available for comment. Over the last six months, the Gammon Infra share has fallen 3.8% and on Tuesday the stock closed 1.11% up at R13.65.
The cash crunch at Gammon Infra throws a spanner in the works of parent Gammon India’s plans to sell its loss-making subsidiary. Gammon India itself has been in dire straits for several years now, having restructured its debt of about R13,500 crore in June 2013 under the corporate debt restructuring cell.
Although it has been trying to monetise some of its power, oil, gas and real estate assets — it has 185 acres in Dombivali, a suburb of Mumbai — for close to a year now, it hasn’t succeeded.
The auditors of Gammon Infra noted in the January-September 2014 annual report that were significant doubts and uncertainties over the ability of the joint venture — the MPT project was awarded to a joint venture between Gammon Infra and Spanish firm Dragados in 2007 — to continue as a going concern. At the end of September 2014, the debt on Gammon Infra’s books was Rs 3,565.71 crore. The auditors also cautioned Gammon Infra over its current liabilities exceeding the current assets, casting a shadow over the company’s debt servicing ability.
Mohanty said that delays and arbitrations in many projects had led to cost escalations and rise in finance costs for the company. It made losses of Rs 40 crore in the period. During the December 2014 quarter the company reported a net profit of Rs 6 crore.
The MPT project is yet to commence construction since the port hasn’t been able to complete dredging. In 2013, Gammon had asked MPT for claims of Rs 300 crore for delay in completion of the dredging project, which is still not complete.
Mohanty said that the company currently has six to seven operational projects with three more becoming operational in FY16. The new projects include the 30 MW Pravara co-generation power project, Rajahmundry Godavari Bridge Limited and Patna Hajipur Highway. He said the company will invest an incremental Rs 600-700 crore in FY16.