Lenders take control of Gammon India

By: | Published: January 23, 2016 1:18 AM

Banks now control a 53.54% stake in debt-laden construction and engineering company Gammon India. The consortium of eight banks has become the largest shareholder of Gammon India...

On November 23, corporate debt restructuring lenders had decided to invoke the Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) scheme in Gammon India to convert a portion of its debt to equity.On November 23, corporate debt restructuring lenders had decided to invoke the Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) scheme in Gammon India to convert a portion of its debt to equity.

Banks now control a 53.54% stake in debt-laden construction and engineering company Gammon India. The consortium of eight banks has become the largest shareholder of Gammon India in the public shareholder category, according to the shareholding pattern of the company as on December 29 on the BSE. The shareholding under financial institutions/banks stood at 2.18% as on September 30.

ICICI Bank, which is the lead bank in the consortium, holds the highest share with 13.82%. Punjab National Bank is the second largest shareholder with 8.45% stake. Others include Syndicate Bank, Bank of Baroda, Allahabad Bank, Oriental Bank of Commerce, Union Bank of India and Bank of Maharashtra in terms of their shareholding in the company.

On November 23, corporate debt restructuring lenders had decided to invoke the Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) scheme in Gammon India to convert a portion of its debt to equity.

The company’s gross debt at the end of March 2014 stood at Rs 11,061 crore, up 15.4% over March 2013, Bloomberg data showed. In FY14, the company reported a consolidated net loss of Rs 729 crore on the back of Rs 3,763 crore in revenues. Finance costs stood at Rs 699 crore. The company has not reported its 2015 earnings numbers. Gammon India’s CDR package of Rs 13,000 crore in 2013 was among the largest approved in the last two years.

The company is promoted by Abhijit Rajan (2.84%), who is also its chairman and managing director. Other promoters include Pacific Energy (6.26%) and Devyani Estate and Properties (4.24%), among others.

Their stakes have come down from 5.99%, 13.20% and 8.93% respectively, at the end of September 2015.

According to the Master Restructuring Agreement (MRA) dated September 24, 2013, executed by Gammon India with the CDR lenders, the company was required to ensure that either the corporate guarantees issued by the company on behalf of its subsidiaries are released in full or the company monetises or divests its investments in domestic and overseas subsidiaries.

However, the company is understood to have made minimal progress on monetisation of assets and sale of foreign businesses. So far, the company has managed to sell its entire stake in its infrastructure arm Gammon Infrastructure Projects, only to another of its subsidiary Gammon Power.

The SDR rules allow banks to convert a company’s debt into shares at a price below the current market value or an average of closing prices in the 10 trading days before a decision is taken at the joint lenders’ forum(JLF). They can hold at least 51% of the equity of the company.

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