Gammon India has received an investment proposal from the Italian ICAP Group for its transmission and distribution (T&D) business following a strategic debt restructuring (SDR) of the firm by lenders in November last year, people aware of the development told FE. While bankers that FE spoke to said the company had also received a proposal from the Welspun Group for its engineering, procurement and construction (EPC) business, the Welspun Group said it had shown no such interest.
Following the SDR, Gammon India will be split into three separate entities to house the EPC, T&D and residual businesses, a source said, adding that no proposal has been received for the residual business. An email seeking comments from Gammon India remained unanswered.
Late last week, FE had reported that banks now control a 53.5% stake in the debt-laden construction and engineering company.
While ICICI Bank, the leader of the consortium, holds the highest share with 13.82%, Punjab National Bank is the second largest shareholder with a stake of 8.45%. Others include Syndicate Bank, Bank of Baroda, Allahabad Bank, Oriental Bank of Commerce, Union Bank of India and Bank of Maharashtra.
The ICAP Group has interests in the automotive, pharmaceutical, glass, reels handling and other sectors with offices in China and the US. The $3 billion Welspun Group is an integrated player in the pipes, plates and coils and home textiles sector and also has a presence in other business verticals such as steel, infrastructure and energy.
On November 23, lenders had decided to initiate an SDR for Gammon India by converting a portion of its debt to equity. Lenders have 18 months to find a buyer for the firm, failing which the account will need to be classified as a non-performing asset (NPA). In August last year, Gammon India’s board had approved the restructuring and transfer of its EPC business to Gammon Retail Infrastructure (GRIL) and the T&D business to Transrail Lighting (TLL), subsidiaries of Gammon India. In FY14 ending September 2014, GRIL reported a loss of Rs 42,807 and TLL reported a net loss of Rs 89.3 lakh.
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 corporate debt restructuring 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.
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.
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. They can own at least 51% of the company.