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Directors Report of Gammon India Ltd.

Dec 31, 2013

The Directors have pleasure in presenting their 92nd Annual Report together with the Audited Accounts of the Company for the nine (9) months period ended 31st December, 2013.

1. FINANCIAL PERFORMANCE & OPERATIONS:

(Rs. in Crores)

Standalone Consolidated

Particulars 9 months 2012-2013* 9 months 2012-2013 ended ended 31.12.2013 31.12.2013

Profit before Other Income, Depreciation & (510.01) (21.54) (30.01) 163.79 Interest

Add:

Other Income 84.44 132.42 46.34 91.37

Less:

Depreciation 83.30 107.39 273.01 343.67

Interest 402.15 443.41 683.54 827.35

Profit/(Loss) before Tax (911.02) (439.92) (940.22) (915.86)

Less:

Provision for Taxation (145.11) 5.75 (123.29) 6.06

Profit/(Loss) after Taxation (765.91) (445.67) (816.93) (921.92)

Transferred to Minority Interest Nil Nil 55.07 72.09

Profit/(Loss) for the year (765.91) (445.67) (761.86) (849.83)

Add:

Profit brought forward from the previous year (77.21) 368.34 (1051.74) (173.80)

Available for Appropriation (843.12) (77.33) (1813.60) (1023.63)

Appropriations:

Dividend from Own Shares Nil (0.12) Nil (0.12)

Transfer to Capital Reserve Nil Nil Nil 0.70

Transfer to Foreign Currency Translation Nil Nil 120.64 23.70 Reserve

Adjustments to Minority Interest Nil Nil (2.41) 0.09

Adjustments due to change of stake in Sofinter Nil Nil (18.29) Nil S.p.A.

Dividend (Proposed) Equity Shares Nil Nil Nil 2.29

Tax on Dividend Nil Nil Nil 1.48

Other Adjustments Nil Nil 0.32 (0.04)

Balance carried to Balance Sheet (843.12) (77.21) (1913.86) (1051.74)

*Figures for the previous period have been regrouped.

The year under review is a 9 month period commencing from 1st April, 2013 and ending on 31st December, 2013. During the period, the Turnover of the Company on a Standalone basis stood at Rs. 3,279.31 Crores as compared to the Turnover of Rs. 5,197.36 Crores for the previous year. The annualized percentage decrease in the Turnover over the previous year''s Turnover amounted to 16%. The Company posted a Net Loss of Rs. 765.91 Crores during the period ended 31st December, 2013 as against a Net Loss of Rs. 445.67 Crores during the previous year ended 31st March, 2013.

On a Consolidated basis the Turnover of the Gammon group stood at Rs. 4,932.42 Crores as compared to the Turnover of Rs. 7,494.22 Crores for the previous year. The annualized percentage decrease in the Turnover over the previous year''s Turnover amounted to 12%. The group posted a Net Loss of Rs. 761.86 Crores during the period ended 31st December, 2013 as against a Net Loss of Rs. 849.83 Crores during the previous year ended 31st March, 2013.

Since the last two years the construction industry has been facing severe recessionary trends. This has created negative sentiment in the sector leading to postponement of projects, delays in decision making by government agencies and large PSU''s. Furthermore, inordinate delays in clearing of dues, adverse regulatory environment and bureaucratic apathy has caused numerous delays in execution of projects. The downturn in the Company''s operations continued unabated during the year under review. The severe liquidity crisis affected project execution. The Company continues to face difficulties in realising receivables and arbitration claims and revenues continued to remain stagnant due to delay in execution. All this led to re-assessment of jobs, higher borrowings and higher interest costs coupled with fall in margins.

Further considering the economic scenario in Europe and uncertainties prevailing there, the Company on a prudent basis and following the principal of conservatism, made provisions against risk & contingencies towards impairment of investments/ advances in its overseas companies.

Several options are being explored for overcoming the liquidity crisis such as sale of non-core assets, disposal of idle equipment, pursuing rigorous austerity measure across the Company and actively exploiting its real estate projects. The Company is also aggressively pursuing monetisation of international power and oil business and amicable settlement of non-routine collection including claims and arbitration awards. In view thereof, although there are cash losses during the period, management is confident of tiding over the tight liquidity position with support from its bankers. During the year under review the order book however has been encouraging. The Company has been awarded 17 new projects aggregating to Rs. 3,500 Crores. The order book position of the Company as on 31st December, 2013 stood at Rs. 14,000 Crores.

2. DIVIDEND:

In view of the loss incurred during the nine (9) months period under review, the Board regrets its inability to declare any dividend for the nine (9) months period ended 31st December, 2013.

3. DEPOSITORY SYSTEM:

The Company''s equity shares are compulsorily tradable in electronic form. As of 31st December, 2013, 93.05% of the Company''s total paid-up capital representing 127,027,064 equity shares is in dematerialized form. In view of the benefits offered by the Depository system, members holding shares in physical mode are advised to avail the demat facility.

4. CHANGES IN CAPITAL STRUCTURE:

During the period under review, the Company increased its Authorized Share Capital from Rs. 176 Crores to Rs. 15,047 Crores. The aforesaid increase was approved by the shareholders by way of Postal Ballot, results of which were declared on 31st December, 2013. The aforesaid increase in the share capital was necessitated to comply with the terms of the agreement with the CDR Lenders to provide for adequate equity capital in case the lenders wish to exercise their option for converting loans into equity.

5. FINANCE:

During the year under review the Company did not raise any funds from the capital markets either by way of issue of equity shares / ADR / GDR. The Company has obtained financial assistance from its consortium bankers to meet its short term working capital requirements.

During the year under review the Company did not raise any debt by way of issue of Debentures. The total amount of outstanding Non-Convertible Debentures as on date is Rs. 324 Crores.

CARE has assigned the following ratings:

Facilities Amount Ratings (Rs. in Crores)

Long Term Bank Facilities 1,300 CARE B

Long / Short Term Bank Facilities 10,400 CARE A4

Non-Convertible Debentures 500 CARE B

CP / STD 900 CARE A4

CP / STD* 100 CARE A4

*Carved out of working capital limits.

Members may recall that the Company had, in the 91st Annual Report for the financial year 2012-13, informed that the Company''s Corporate Debt Restructuring package ("CDR Package") was approved by the Corporate Debt Restructuring Empowered Group. Further, a snapshot of the Company''s CDR Package was also provided in the aforementioned Annual Report. The Company had commenced implementation of the CDR package during the period under review.

To ensure implementation of the CDR Package ICICI Bank Limited has been appointed as the Monitoring Institution and IDBI Security Trusteeship Limited ("ITSL") has been appointed as the Security Trustee to act as such on behalf of the CDR Lenders. Total Debt aggregating to Rs. 14,814.17 Crores (including both, fund based & non-fund based and additional priority loan for meeting the immediate financial needs of the Company) has been restructured.

As on the date of this Report, the following activities, as envisaged in the Company''s CDR Package have been completed:

- Master Restructuring Agreement executed with the CDR Lenders.

- The Promoters along with their affiliates have brought in an amount of Rs. 100 Crores as Promoters'' Contribution.

- Personal Guarantee executed by Mr. Abhijit Rajan - Chairman & Managing Director.

- The Promoters have pledged their shareholding in the Company in favour of ITSL.

- Nikhita Estate Developers Private Limited, a promoter group company, has executed Corporate Guarantee on behalf of the Company in favor of ITSL as collateral security.

- The Company has opened separate Trust & Retention Accounts with ICICI Bank Limited.

- The promoters of Nikhita Estate Developers Private Limited ("NEDPL''), a promoter group company, have pledged their shareholding in NEDPL in favor of ITSL.

- The Company has also created security by way of:

(i) Pledge over its shareholding in its following subsidiaries viz. Deepmala Infrastructure Private Limited (23%),

Ansaldocaldaie Boilers India Private Limited (24%), Transrail Lighting Limited (100%) and Gactel Turnkey Projects Limited (100%).

(ii) Hypothecation of the Company''s Current Assets.

(iii) Mortgage of the Company''s immovable properties in the State of Maharashtra, Gujarat, Karnataka & West Bengal.

(iv) Execution of an undertaking to create pledge over (i) the resultant shares of Metropolitan Infra housing Private Limited (the Company''s subsidiary) after signing the joint venture agreement (by whatever name called) with the developer.

6. PUBLIC DEPOSITS:

Your Company did not invite or accept deposits from public during the year under review.

7. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:

During the year under review, the Company has transferred Dividend (for the year 2005-06) amounting to Rs. 241,101/- to Investor Education and Protection Fund (IEPF), which was due and payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205C(2), of the Companies Act, 1956. Unclaimed interim dividend and the unclaimed final dividend for the year 2006-2007 is due for transfer on or before 23rd May, 2014 and 21st November, 2014 respectively.

8. EMPLOYEE STOCK OPTION SCHEME:

The erstwhile Associated Transrail Structures Limited (ATSL) had introduced an Employee Stock Option Scheme for the benefit of its employees. Pursuant to the amalgamation of ATSL with the Company, effective from 7th July, 2009, the said scheme was taken over by the Company. The said scheme expired on 28th March 2014. Details of the stock options granted under the Employee Stock Option Scheme-2007 of erstwhile ATSL are disclosed in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and set out in Annexure ''A'' of this Report.

9. SUBSIDIARY COMPANIES:

No new subsidiary was incorporated / acquired by the Company during the nine (9) months period ended 31st December, 2013. During the period under review, the name of Gammon Renewable Energy Infrastructure Limited (Company''s step down subsidiary) was changed to Gammon Renewable Energy Infrastructure Projects Limited. The Company''s step down subsidiaries viz. (a) Kasavati Renewable Energy Private Limited & (b) Dohan Renewable Energy Private Limited were struck off the Register of Companies by the Ministry of Corporate Affairs on an application made by the respected companies. The said companies stand dissolved w.e.f. 21st March, 2014.

As per the General Circular 08/2014 No. 1/19/2013-CL-V dated 4th April 2014 issued by the Ministry of Corporate Affairs, the financial statements (and documents required to be attached thereto), auditors report and Board''s report in respect of financial years that commenced earlier than 1st April, 2014 shall be governed by the relevant provisions/ Schedules/rules of the Companies Act, 1956. In view of the same the financial information of the Company''s subsidiaries have been provided as per the provisions of the erstwhile Companies Act, 1956 and the applicable circulars issued there under.

The Ministry of Corporate Affairs, Government of India has, vide General Circular No. 2/2011 dated 8th February 2011 read together with General Circular No. 3/2011 dated 21st February, 2011, granted exemption under Section 212(8) of the Companies Act, 1956, for not attaching Annual Report of subsidiary companies, subject to fulfillment of certain conditions by the holding company. As stated in the said circulars, the Board of Directors, vide its resolution dated 3rd April, 2014 accorded its consent for not attaching the balance sheet of the subsidiaries. Further the Company has presented in the Annual Report, the consolidated financial statements of the Company and all its subsidiaries duly audited by its statutory auditors. The consolidated financial statements have been prepared in strict compliance with the applicable Accounting Standards and, where applicable, the Listing Agreement as prescribed by the Securities and Exchange Board of India. The Company has disclosed in the consolidated balance sheet the following information in aggregate for each subsidiary including subsidiaries of subsidiaries:- (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (except in case of investment in the subsidiaries) (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation (j) proposed dividend.

10. CONSOLIDATED FINANCIAL STATEMENTS:

Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Clause 32 of the Listing Agreement entered into with the Stock Exchanges and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard.

11. DIRECTORS'' EXPLANATION ON AUDITOR''S REPORTS:

Following are the directors'' comments on the "Basis of Qualified Opinion" in the Audit Report dated 18th March, 2014 on Standalone Financial Statements and "Basis of Qualified Opinion" in the Audit Report dated 3rd April, 2014 on Consolidated Financial Statements for the nine (9) months period ended 31st December, 2013:

a. With reference to clause (a) of the "Basis of Qualified Opinion" in the Audit Reports on both Standalone as well as Consolidated Financial Statements wherein the auditors have opined that "due to non-availability of Financials of Franco Tossi Mecanica S.p.A, ("FTM") the Company''s subsidiary in Italy, they are unable to comment upon the adequacy or otherwise of the provisions made", the Board would like to inform you that as mentioned in Note 33(c) of Standalone and in Note 1(a)(ii) of Consolidated Financial Statements, FTM had filed an application for a pre-insolvency procedure which has been admitted by a court at Milan. In light of the ongoing procedure no financial statements of the company have been released to date by the empowered Commissioner. It is expected that these will not be released until the entire process is complete. However the Company has made adequate provision towards its exposure for all the known liabilities in the said subsidiary. Further, the step down subsidiary holding the shares of FTM has entered into a memorandum of understanding with an intended purchaser for sale of its investment in FTM. The sale purchase agreement is however subject to the regulators, bankers and shareholders'' approval.

b. With reference to clause (b) of the "Basis of Qualified Opinion" in the Audit Reports on both Standalone as well as Consolidated Financial Statements wherein the auditors have opined that "they are unable to comment on the adequacy of the provisions made towards the Company''s exposure in investments in and Guarantees given by the company in respect of SAE Power lines S.p.A, the Company''s subsidiary in Italy", the Board would like to inform you that as mentioned in Note 33(e) of Standalone and in Note 1(a)(v) of Consolidated Financial Statements, on the basis of offer received from an intended buyer the Company has made a provision towards guarantees given for the acquisition loan taken by SPV.

c. With reference to clause(c) of the "Basis of Qualified Opinion" in the Audit Report on Standalone financial statements regarding contribution to charitable funds /institutions, the Board would like to inform you that these were necessitated due to business exigencies and the permission of the shareholders is being sought to make any further contributions.

d. With reference to clause(d) of the "Basis of Qualified Opinion" in the Audit Report on Standalone Financial Statements and Clause (h) of the "Basis of Qualified Opinion" in the Audit Report on Consolidated Financial Statements, wherein the auditors have opined on managerial remuneration, the Board would like to inform you that as mentioned in Note 24(a) of Standalone and in Note 24(a) of Consolidated Financial Statements, the Company''s application for waiver of excess remuneration paid to CMD and paid to an Executive Director during the year 2011-12 has been rejected. The Company has preferred a representation to the Ministry to reconsider its decision and reply is awaited. The Company''s application for payment of remuneration to Chairman & Managing Director for years 2012-13 and 2013-14 is pending for approval with the Central Government. Hence no effect for the same has been given in the financial statements.

e. With reference to clause (c) and clause (d) of the "Basis of Qualified Opinion" in the Audit Report on Consolidated Financial Statements wherein the auditors have reported that the financial statements of Sofinter S.p.A., Campo Puma Oriente S.A. and Finest S.p.A. are unaudited, the Board would like to inform you that as mentioned in Note 1 (b)(iv) and Note 1 (a)(i) of Consolidated Financial Statements, the financial statements of Sofinter S.p.A., Campo Puma Oriente S.A. and Finest S.p.A. could not be audited due to the short period of time available for the completion of the audit. The audit work is in progress. Meanwhile, the financial statements are therefore based on Unaudited/management accounts signed by one of the directors representing GIL.

f. With reference to clause (e) of the "Basis of Qualified Opinion" in the Audit Report on Consolidated Financial Statements, wherein the auditors have reported that in absence of sufficient information they are unable to assess the recoverability of the net receivables of Itro Pte Ltd, an Associate of Sofinter S.p.A., the Board would like to inform you that as mentioned in Note 1(b)(iv) of Consolidated Financial Statements, the directors of Itro Pte Ltd believe that it will be able to complete the start-up phase in a reasonable time frame and to start generating sufficient cash flows to enable it to discharge its financial commitments. However, the directors of Itro Pte Ltd believe that since they are unable to forecast with reasonable certainty the time frame for collection, auditors of Itro Pte Ltd have qualified their opinion in this regard.

g. With reference to clause(f) of the "Basis of Qualified Opinion" in the Audit Report on Consolidated Financial Statements, wherein the auditors have reported about the non-recognition of possible claims on trade receivables of Europower S.p.A., a subsidiary of the Associate Sofinter S.p.A., the Board would like to inform you that Europower S.p.A. has initiated legal proceedings in the competent court in Italy, against their customer to recover the amount of Euro 3 Million i.e. Rs. 25.61 crores (Company''s share being Euro 1.35 Million (Rs. 11.52 crores). Pending the outcome of the said litigation, the risk of non-recovery arising from the same has been provided by Europower S.p.A to the extent of 2.3 Million Euro i.e. Rs. 17.92 crores. Considering the current status of the legal proceedings, the Directors of the said Euro power S.p.A. believe that Sofinter S.p.A. will not incur additional losses over and above the said amount.

h. With reference to clause(g) of the "Basis of Qualified Opinion" in the Audit Report on Consolidated Financial Statements, wherein the auditors have reported about non provision of trade receivables of Gammon & Billimoria LLC (GBLLC),Dubai a Subsidiary of the Company, the Board would like to inform you that the amount is due from a Debtor of GBLLC which includes retention money aggregating to AED 2.7 million (Rs. 4.54 crores) due to GBLLC acting as a sub-contractor. The management of the said subsidiary is of the opinion that the amount is contractually recoverable and the subsidiary company is in negotiations with the principal client and in the company''s opinion no provision is required to be made towards the same.

i. With reference to clause(x) of the Annexure to the Audit Report on Standalone Financial Statements, wherein the auditors have mentioned that the accumulated losses of the Company are in excess of 50% of the net worth of the Company, the Board would like to inform you that the said disclosure has been made by the auditors as a requirement under the Companies (Auditor''s Report) Order, 2003 for the nine (9) months period ended 31st December, 2013 and that the Company is not a potentially sick company in terms of Section 23 of the Sick Industrial Companies Act, 1985.

j. Members attention is drawn to "Emphasis of Matter" stated in the Auditor''s Report dated 18th March, 2014 on the Standalone Financial Statements and in the Audit Report dated 3rd April, 2014 on the Consolidated Financial statements for the nine (9) months period ended 31st December, 2013. The Directors would like to state that the said matters are for the attention of members only and have been explained in detail in the relevant notes to accounts as stated therein and hence require no further clarification.

12. AUDITORS:

M/s. Natvarlal Vepari & Co., Chartered Accountants, Firm Registration No. 106971W, Statutory Auditors of the Company retire at the ensuing Annual General Meeting and are eligible for re-appointment. A certificate to the effect that their appointment, if made, will be within the prescribed limits under Section 141 of the Companies Act, 2013, has been obtained from them. The Board on the recommendation of the Audit Committee recommends the re-appointment of M/s. Natvarlal Vepari and Company as Statutory Auditors of the Company for the next three (3) financial years i.e. 2014-15, 2015-16 and 2016-17.

The Board also, on the recommendation of the Audit Committee, recommends the re-appointment of M/s. Vinod Modi & Associates, Chartered Accountants, Firm Registration No. 111515W and M/s. M. G. Shah & Associates, Chartered Accountants, Firm Registration No. 112561W, as the Joint Branch Auditors of ''Gammon India Limited - Transmission & Distribution Business, Nagpur'' for the next five (5) financial years i.e. 2014-2015, 2015-16, 2016-17, 2017-18 and 2018-19, subject to approval by the Shareholders.

13. COST AUDITOR :

Pursuant to the Cost Audit Order dated 24th January, 2012 issued by the Ministry of Corporate Affairs (MCA), the Board of Directors has appointed Mr. R. S. Raghavan, as the Cost Auditor for audit of cost accounting records of the transmission and distribution business for the nine (9) months period ended 31st December, 2013. The report of the Cost Auditor will be filed with the MCA within the prescribed period.

The Board, in its meeting held on 18th March 2014, has on the recommendation of the Audit Committee approved the re-appointment of Mr. R. S. Raghavan as the Cost Auditor of the Company for the financial year 2014-15 for the applicable product of the transmission and distribution business. The appointment is subject to the approval of the Central Government.

14. REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS:

Report on Corporate Governance and Management Discussion and Analysis Report for the year under review, together with a Certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance, as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

15. DIRECTORS:

Pursuant to the provisions of Section 152 of the Companies Act, 2013 (the "Act") and the Articles of Association of the Company, Mr. Parvez Umrigar retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Notice convening the Annual General Meeting includes the proposal for his re-appointment as the Director.

As on the date of this report, the Company''s Board consists of the following Independent Directors:

1. Mr. Chandrahas C. Dayal

2. Mr. Naval Choudhary

3. Mr. Jagdish Sheth

4. Mrs. Urvashi Saxena

5. Mr. Atul Kumar Shukla

6. Mr. Atul Dayal

The period of office of the aforementioned directors was liable to determination by retirement of directors by rotation under the erstwhile Companies Act, 1956. In terms of Section 149 and other applicable provisions of the Companies Act, 2013, the aforementioned directors being eligible and offering themselves for appointment, are proposed to be appointed as Independent Directors for a term of five (5) consecutive years commencing from 1st April, 2014 upto 31st March, 2019.

Brief profile of the proposed appointees together with other disclosures in terms of Clause 49 of the Listing Agreement are part of the Annexure to the Notice of the 92nd Annual General Meeting.

16. DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 217 (2AA) of the Companies (Amendment) Act 2000, the Directors confirm that:

1. The applicable accounting standards have been followed by the Company in preparation of the annual accounts for the nine (9) months period ended 31st December, 2013;

2. The Directors have selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st December, 2013 and of the loss of the Company for the year ended on that date;

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

4. The annual accounts for the nine (9) months period ended 31st December, 2013 have been prepared on a going concern basis.

17. PARTICULARS OF EMPLOYEES:

The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all shareholders, excluding the statement of particulars of employees. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company.

19. ACKNOWLEDGEMENTS:

Your Directors thank all its valued customers and various Government, Semi-Government and Local Authorities, Suppliers and other Business associates. Your Directors appreciate continued support from Banks and Financial Institutions and look forward to their co-operation in the future.

Your Directors place on record their appreciation of the dedicated efforts put in by the employees at all levels and wish to thank the Shareholders and all other stakeholders for their unstilted support and co-operation.

For and on behalf of the Board of Directors

ABHIJIT RAJAN

Chairman & Managing Director

Place : Mumbai

Dated : 3rd April, 2014


Mar 31, 2013

The Directors have pleasure in presenting their 91st Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2013.

1. FINANCIAL PERFORMANCE & OPERATIONS:

(Rs.in Crore)

Standalone Consolidated Particulars 2012-2013 2011-2012* 2012-2013 2011-2012

Profi t before Other Income, Depreciation & (21.54) 459.02 163.79 689.13

Interest Add:

Other Income 132.42 159.52 91.37 180.86

Less:

Depreciation 107.39 101.99 343.67 242.96

Interest 443.41 363.42 827.35 652.83

Profit/(Loss) before Tax (439.92) 153.13 (915.86) (25.80)

Less: Provision for Taxation 5.75 66.09 6.06 95.52

Profi t/(Loss) after Taxation (445.67) 87.04 (921.92) (121.32)

Transferred to Minority Interest Nil Nil 72.09 16.18

Profi t/(Loss) for the year (445.67) 87.04 (849.83) (105.14)

Add:

Profi t brought forward from the previous year 368.34 341.67 (173.80) 64.37

Available for Appropriation (77.33) 428.71 (1023.63) (40.77)

Appropriations:

Transfer to General Reserve Nil 10.00 Nil 19.06

Transfer to Debenture Redemption Reserve Nil 47.43 Nil 47.43

Transfer from Debenture Redemption Reserve Nil Nil Nil Nil

Dividend from Own Shares (0.12) (0.23) (0.12) (0.23)

Transfer to Capital Reserve Nil Nil 0.70 0.28

Transfer to Foreign Currency Translation Reserve Nil Nil 23.70 56.46

Adjustments to Minority Interest Nil Nil 0.09 0.58

Dividend (Proposed) Equity Shares Nil 2.73 2.29 2.73

Tax on Dividend Nil 0.44 1.48 7.73

Other Adjustments Nil Nil (0.04) (1.01)

Balance carried to Balance Sheet (77.21) 368.34 (1051.74) (173.80)

*Figures for the previous period have been regrouped.

The Turnover of the Company on a Standalone basis stood at Rs. 5,197 Crore for the year ended 31st March, 2013 (Rs. 5,533 Crore previous year). Operating Profi t (PBDIT) amounted to Rs. (21.54) Crore (Rs. 459.02 Crore previous year). After providing Rs. 107.39 Crore (Rs. 101.99 Crore for the previous year) towards depreciation and Rs. 5.75 Crore (Rs. 66.09 crore previous year) towards tax for current and deferred taxation, the net profi t amounted to Rs. (445.67) Crore (Rs. 87.04 Crore previous year). The annualized percentage decrease in turnover over previous year amounted to 6%.

On a consolidated basis the turnover of the Gammon group stood at Rs. 7494.22 crore for the year ended 31st March, 2013. The annualized percentage decrease in turnover over previous year''s turnover amounted to 8.03%. The group made a loss of Rs. 849.83 crores for the year ended 31st March, 2013 as compared to a loss of Rs. 105.14 crores in the previous year. This was mainly on account of increase in interest costs due to higher borrowings, impairment of Goodwill and diminution in the value of investment.

During the year under review, the Company has been facing tight liquidity position arising out of overall deceleration in the economy, lower industrial growth, delayed or indecisions at various governments and large PSU clients'' level affecting the project progress and project variations. The liquidity crisis arising out of delayed and withheld payments resulted in higher debts thereby increasing the interest costs by 22%. Slowdown in the power investments in the power sector had adversely affected the power projects and this has also affected your Company''s construction projects in the power sector.

This necessitated re-assessment of jobs considering the delays in project execution on account of funding diffi culty. Many of the jobs turned negative on increased costs due to time and cost overruns on account of unfavorable working capital cycle arising out of increased inventory and outstanding receivables, which in accordance with Accounting Standard 7 required upfront recognition of the project loss.

Considering the current economic scenario in Europe, the Company on prudent basis has made provisions in connection with its investments / advances to/in its overseas companies. While the Company is entitled to claims of prolongation and other variations which would be subject matter of arbitration/disputes relating to above, pending raising of the claim and its settlement, on a prudent basis it has not factored for any claims/ variations in excess of costs incurred thereon.

All these factors have eroded margins resulting in PBT losses, both on a standalone and consolidated basis.

During the year under review the Company re-alligned its debts through the process of Corporate Debt Restructuring which has been explained in detail below as well as in the Management Discussion and Analysis Report .

Given the challenging times ahead in order to improve margins and liquidity position, the Company is working on the following parameters to improve margin and liquidity. The Company has focused on cost management, making leaner organization, focused bidding process and being selective, optimum design and engineering with focus on standardization, improving plant productivity, rigorous focus on cash fl ow with focus on debtors, retention and inventory cycle and active and rigorous contract management to realize claims held up with clients.

The order book position of the Company as on 31st March, 2013 stood at Rs. 13,760 Crore. The Company secured additional projects worth Rs. 2,055.73 crores until the date of this report.

2. DIVIDEND:

In view of the loss incurred during the year the Board regrets its inability to declare any dividend for the year ended 31st March, 2013.

3. DEPOSITORY SYSTEM:

The Company''s equity shares are compulsorily tradeable in electronic form. As of 31st March, 2013, 93.04% of the Company''s total paid-up capital representing 127,003,594 equity shares is in dematerialized form. In view of the benefi ts offered by the Depository system, members holding shares in physical mode are advised to avail the demat facility.

4. FINANCE:

During the year under review the Company did not raise any funds from the capital markets either by way of issue of equity shares / ADR / GDR. The Company has obtained fi nancial assistance from its consortium bankers to meet its short term working capital requirements.

During the year under review the Company did not raise any debt by way of issue of Debentures. The total amount of outstanding Non-Convertible Debentures as on date is Rs. 324 Crores.

CARE has assigned the following ratings:

Facilities Amount Ratings

(Rs.in Crores)

Long Term Bank Facilities 1,300 CARE B

Long / Short Term Bank Facilities 10,400 CARE B / CARE A4

Non-Convertible Debentures 500 CARE B

CP / STD 900 CARE A4

CP / STD* 100 CARE A4

*Carved out of working capital limits.

5. CORPORATE DEBT RESTRUCTURING:

The construction industry has been facing severe recessionary trend. Decelerated economy, slower industrial growth, delays in large PSUs projects caused delays wherein profi tability of certain projects eroded on increased costs. Further Government inaction, delays in awarding projects, delays in clearances by various government agencies, bureaucratic apathy has led to delays in the project progress at various project sites. Also, delayed recievables, stagnation in revenues, high interest costs and expansion into non-core areas did not yield the expected returns which led to liquidity mismatches and increase in borrowings. This further resulted in higher interest outgo on higher borrowings coupled with higher interest regime.

In order to overcome this fi nancial crisis, the Company sought to realign its debts through the Corporate Debt Restructuring mechanism. The Corporate Debt Restructuring Empowered Group (''CDR EG'') examined the Company''s proposal and a fi nal debt restructuring package was approved by the CDR EG and communicated to the Company by the Corporate Debt Restructuring Cell vide its Letter of Approval dated 29th June, 2013, amendment letters dated 31st July, 2013 and 3rd August, 2013. The salient features of the CDR package are:

1. Cut off date is 1st January, 2013.

2. Total Debt rescheduled :

a) Rs. 3373.74 crores fund based inclusive of short term and long term loans.

b) Rs. 10,400 crores of non-fund based limits sanctioned earlier are being continued.

3. Re-schedulement of Short Term Loans, Term Loans and Non Convertible debentures payable over a period of ten years.

4. Funded interest for fi fteen months period from January, 2013 to March, 2014.

5. Priority loan sanctioned for meeting the immediate fi nancial needs of the Company.

6. Waiver of penal charges from the cut off date to the date of implementation of the package.

7. Reduction in the rate of interest by 1% for 15 (fi fteen) months period from January 2013 to March, 2014.

The documentation and security creation is under process and the Company will be seeking shareholders approval for the same.

The Approval of the CDR package refl ects the faith of the CDR lenders in the Company‘s commitment towards being ''Builders to the Nation''.

6. PUBLIC DEPOSITS:

Your Company did not invite or accept deposits from public during the year under review.

7. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:

During the year under review, the Company has transferred Fixed Deposits amounting to Rs. 500,000/- and Dividend (for the year 2005-06) amounting to Rs. 217,424/- to Investor Education and Protection Fund (IEPF), which was due and payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205C(2), of the Companies Act, 1956. Unclaimed Dividend for the year 2005-2006 is due for transfer to IEPF on 29th November, 2013.

8. EMPLOYEE STOCK OPTION SCHEME:

The erstwhile Associated Transrail Structures Limited (ATSL) had introduced an Employee Stock Option Scheme for the benefi t of its employees. Pursuant to the amalgamation of ATSL with the Company, effective from 7th July, 2009, the said scheme has been taken over by the Company. Details of the stock options granted under the Employee Stock Option Scheme-2007 of erstwhile ATSL are disclosed in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and set out in Annexure ‘A'' of this Report.

9. SUBSIDIARY COMPANIES:

In addition to the subsidiaries as reported in the previous year the following companies were further incorporated/ acquired as subsidiaries/step down subsidiaries during the year under review:

1. Patna Water Supply Distribution Network Private Limited

2. Birmitrapur Barkote Highway Private Limited

3. Yamunanagar Panchkula Highway Private Limited

4. Sidhi Singrauli Road Project Limited

5. Mormugao Seaport Limited

During the year under review, the name of Mormugao Seaport Limited (Company''s step down subsidiary) was changed to Mormugao Terminal Limited. The name of Yamuna Renewable Energy Private Limited was changed to Yamuna Minor Minerals Private Limited. The Company had incorporated an LLP viz Brookfi eld Multiplex Gammon India LLP for the specifi c purpose of carrying out the project of constructing high rise viz'' Nathani Heights''. However Brookfi elds Multiplex Private Limited resigned from the joint venture and the partnership and the project is now being executed by the Company .

The Ministry of Corporate Affairs, Government of India has, vide General Circular No. 2/2011 dated 8th February, 2011 read together with General Circular No. 3/2011 dated 21st February, 2011, granted exemption under Section 212(8) of the Companies Act, 1956, for not attaching Annual Report of subsidiary companies, subject to fulfi llment of certain conditions by the holding company. As stated in the said circulars, the Board of Directors, vide its resolution dated 30th May, 2013 accorded its consent for not attaching the balance sheet of the subsidiaries. Further the Company has presented in the Annual Report, the consolidated fi nancial statements of the Company and all its subsidiaries duly audited by its statutory auditors. The consolidated fi nancial statements have been prepared in strict compliance with the applicable Accounting Standards and, where applicable, the Listing Agreement as prescribed by the Securities and Exchange Board of India. The Company has disclosed in the consolidated balance sheet the following information in aggregate for each subsidiary including subsidiaries of subsidiaries:- (a) capital (b)reserves (c) total assets (d) total liabilities (e)details of investment (except in case of investment in the subsidiaries) (f) turnover (g) profi t before taxation(h) provision for taxation (i) profi t after taxation (j) proposed dividend;

The annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the Company and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the head offi ce of the Company and of the subsidiary companies concerned and a note to the above effect has been included in the Annual Report of the Company. The Company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand.

10. CONSOLIDATED FINANCIAL STATEMENTS:

Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Clause 32 of the Listing Agreement entered into with the Stock Exchanges and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard.

11. DIRECTORS'' EXPLANATION ON AUDITOR''S REPORT:

a. With reference to point nos. (iii)(c), (ix), (xi), (xvii) of the Annexure to the Auditors'' Report dated 30th May, 2013 on the Standalone Financial Statements for the year ended 31st March,2013, your Directors wish to clarify as follows:

During the last twelve months the Company has been facing a very tight liquidity position arising out of overall deceleration in the economy, lower industrial growth, delayed decisions at various governments and large PSU clients'' level affecting the project progress.

This has necessitated re-assessment of jobs considering the delays in project execution on account of funding diffi culty. Many of the jobs have turned negative, on increased costs due to stretched time frames with unfavourable working capital cycle arising out of increased inventory and receivables, which in accordance with Accounting Standard-7 required recognition of the project loss upfront.

While the Company is entitled to claims of prolongation and other variations which would be subject matter of arbitration/disputes relating to above, pending raising of the claim and its settlement, on a prudent basis it has not factored for any claims/variations in excess of costs incurred thereon.

Even in the last few months the Company is unable to service interest and repayment of principal to bankers. The Company has utilised the funds for long term purpose which had been taken for short term period from lenders due to increase in working capital cycle. In order to overcome this fi nancial crisis the company sought to realign its debts through the Corporate Debt Restructuring mechanism. The Company made a reference to the Corporate Debt Restructuring Cell. Company has received Letter of Approval (CDR LOA) pursuant to the Restructuring Package approved by the CDR Empowered Group.

Other group companies are also passing through the similar liquidity crunch. As of now they are not in the position to service the interest, but based on the business plan of these companies we will be in a position to bring a turnaround of business cycle.

b. With reference to point no. (iv) of the Annexure to the Auditors'' Report dated 30th May, 2013 on the Standalone Financial Statements for the year ended 31st March, 2013 your Directors wish to clarify as follows:

Inventory cycle of the company is on a higher side. To improve this, the company has prepared an agenda to enhance control and bring down the inventory level. The key areas which will be driven are doing material reconciliation on a regular interval, identify waste and plan to reduce waste, raising material requisition based on inventory level and assessing inventory demands segment wise, training store team to build skills to drive various initiatives, doing review on monthly basis.

c. With reference to clause a) of the ''Basis of Qualifi ed Opinion'' in the Audit Report dated 21st June,2013 on the Consolidated Financial statements for the year ended 31st March, 2013 the Board would like to inform you that as mentioned in Note 11(a) the Board of M/s. Franco TosiMeccanica S. p. A. (FTM), a Subsidiary of the Company out of prudence, due to its net losses exceeding 33% of its net worth had decided against an audited Financial Statement of 2012 since, in case if the audit of these accounts were done, FTM had to mandatorily go for recapitalization of the Company as per Article 2447 of the Italian Civil Code. With this, the immediate urgency of recapitalizing FTM was negated.

The Board of FTM fi led on May 30th, 2013 with the Court of Milan (and with the Companies Registry) a ''preliminary'' request for admission to the procedure of pre-insolvency composition agreement with creditors and restructuring debts (''concordatopreventivo''), under Articles 161 Clause 6, Italian Government Publication dated 10 March 1942 no 267 – further amended in September, 2012, in the light of acute fi nancial stress being faced by FTM due to recessionary trends in the industry and Europe in general.

The said application was admitted by the Court on 7th June, 2013. The Court on 25th July, 2013 has appointed a Commissioner, while maintaining the current Management and Board, whose task is to start appropriate procedures, including leasing, by which the operations of the company relating to the backlog and front log orders are preserved and completed while also drawing up a scheme for settlement of the outstanding debts of the creditors of the Company. The time limit available to the Commissioner and the Management of FTM to complete the above and the fi nal approval by the Court is expected by October, 2013. Steps have been initiated to meet the above deadlines including the approval by the Court at which time the further way forward for FTM will get better defi ned.

d. With reference to clause b) of the ''Basis of Qualifi ed Opinion'' in the Audit Report dated 21st June, 2013 on the Consolidated Financial statements for the year ended 31st March, 2013 the Board would like to inform you that as mentioned in note 1(b) (v) of the directors of ItroPte Ltd, an Associate of our Joint Venture Sofi nter S.p.A. believe that due to recent modifi cations to its plant and continuous maintenance ItroPte Ltd will be able to complete the start-up phase in a reasonable timeframe and to start generating suffi cient cash fl ows to enable it to discharge its fi nancial commitments. However, the directors of ItroPte Ltd are unable to forecast with reasonable certainty the time frame for collection, due to which their auditors have qualifi ed their opinion.

e. With reference to clause c) of the ''Basis of Qualifi ed Opinion'' in the Audit Report dated 21st June, 2013 on the Consolidated Financial statements for the year ended 31st March, 2013 the Board would like to inform you that Europower S.p.A. a subsidiary of the joint venture Sofi nter S.p.A. has initiated legal proceeding in the competent court in Italy, against their customer to recover the amount of Euro 3 Million i.e. Rs. 20.86 crores (Company''s share being Euro 1.35 Million (Rs. 9.39 crores). Pending the outcome of the said litigation, the risk arising from outstanding disputes, Europower has made a provision for total of 2.3 Million Euro i.e. Rs. 16 crores. Considering the current status of the legal proceedings, the Directors of Europower S.p.A. believe that Sofi nter S.p.A. shall not incur additional losses over and above the amount of funds allocated.

f. With reference to clause d) of the ''Basis of Qualifi ed Opinion'' in the Audit Report dated 21st June, 2013 on the Consolidated Financial statements for the year ended 31st March, 2013 the Board would like to inform you that with respect to the extent of recoverability of receivables in Dubai from a debtor including retention aggregating to AED 2.7 million (Rs. 3.93 crores) which is due to Gammon & Billimoria LLC (GBLLC), a Subsidiary of the Company acting as a sub-contractor, the management of the said subsidiary is of the opinion that the amount is contractually recoverable and the subsidiary company is in negotiations with the client and hence no provision is made towards the same.

g. Members attention is drawn to ''Emphasis of Matter'' stated in the Auditor''s Report dated 30th May, 2013 on the Standalone Financial Statements and in the Audit Report dated 21st June, 2013 on the Consolidated Financial statements for the year ended 31st March, 2013. The Directors would like to state that the said matters are for the attention of members only and have been explained in detail in the relevant notes to accounts as stated therein and hence require no further clarifi cation.

12. AUDITORS:

M/s. Natvarlal Vepari & Co., Chartered Accountants, Firm Registration no. 106971W, Statutory Auditors of the Company retire at the ensuing Annual General Meeting and are eligible for re-appointment. A certifi cate to the effect that their appointment, if made, will be within the prescribed limits u/s 224(1B) of the Companies Act, 1956 has been obtained from them. The Board on the recommendation of the Audit Committee recommends the re-appointment of M/s. Natvarlal Vepari and Company as Statutory Auditors of the Company for the fi nancial year 2013-14.

The Board also, on the recommendation of the Audit Committee, recommends the re-appointment of M/s. Vinod Modi& Associates, Chartered Accountants, Firm Registration no. 111515W and M/s. M. G. Shah & Associates, Chartered Accountants, Firm Registration no. 112561W, as the Joint Branch Auditors of ‘Gammon India Limited –Transmission& Distribution Business Headquarters, Nagpur'' subject to approval by the Shareholders.

13. COST AUDITORS :

Pursuant to the Cost Audit Order dated 24th January, 2012 issued by the Ministry of Corporate Affairs (MCA), the Board of Directors has appointed R. Raghavan Cost Auditor, as the Cost Auditor for audit of cost accounting records of the transmission and distribution business for the fi nancial year March 31st, 2013. The report of the Cost Auditor will be fi led with the MCA within the prescribed period.

The Board in its meeting held on 21st June, 2013 has on the recommendation of the Audit Commmittee approved the re-appointment of Mr. R. Raghavan as the Cost Auditor of the Company for the year ending 31st March, 2014 for the applicable product of the transmission and distribution business. The appointment has been approved by the Central Government.

14. REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS:

Report on Corporate Governance and Management Discussion and Analysis Report for the year under review,together with a Certifi cate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance, as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

15. DIRECTORS:

Mr. Parvez Umrigar was appointed as an Additional Director designated as Whole-time Director of the Company with effect from 2nd January, 2013. Effective 1st April, 2013. Mr. Umrigar ceased to be the Whole-time Director of the Company. He, however, continues to be on the Company''s Board as Non-Executive & Non-Independent Director and holds offi ce upto the date of the forthcoming Annual General Meeting and is eligible for appointment.

Mr. Rohit Modi resigned as the Deputy Managing Director of Gammon India Limited w.e.f. 30th May, 2012. The Board places on record its sincere appreciation for the services rendered by Mr. Modi during his tenure as the Deputy Managing Director of the Company.

Mr. Himanshu Parikh resigned as the Executive Director of Gammon India Limited w.e.f. 13th March, 2013. The Board places on record its sincere appreciation for the services rendered by Mr. Parikh during his tenure as a Executive Director of the Company.

Pursuant to the provisions of Section 256 of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Jagdish Sheth and Mr. Naval Choudhary retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Notice convening the annual general meeting includes the proposal for appointment /re-appointment of the Directors .Brief profi les of the proposed appointees together with other disclosures in terms of Clause 49 of the Listing Agreement are part of the Annexure to the Notice of the Annual General Meeting.

16. DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 217 (2AA) of the Companies (Amendment) Act 2000, the Directors confi rm that:

1. The applicable accounting standards have been followed by the Company in preparation of the annual accounts for the period ended 31st March, 2013;

2. The Directors have selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the loss of the Company for the year ended on that date;

3. Proper and suffi cient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

4. The annual accounts for the year ended 31st March, 2013 have been prepared on a going concern basis.

17. PARTICULARS OF EMPLOYEES:

The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all shareholders, excluding the statement of particulars of employees. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Offi ce of the Company.

18. PARTICULARS UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988:

A. Conservation of Energy:

Energy has been a vital resource in development of any Industry. With day to day escalation in energy requirements, there has been increased emphasis on energy Conservation to monitor energy consumption and avoid wastage. Company is endeavoring continuously towards energy conservation by adopting innovative measures. Some of the specifi c measures undertaken are :

- Installation of Energy Meters on all DG Sets.

- Monitoring Diesel Consumption of Plant & Machinery.

- Improvement in Diesel Consumption by using Soltron enzyme based additives.

- Installation of Capacitor Banks for Power Savings.

- Use of Variable Frequency Drive (VFD) Starting System, Energy Effi cient Motors for EOT / Gantry Cranes.

- Initiated use of energy saving lighting system at H.O./workshops/sites to maintain consumption of energy.

- Initiated time based operations in H.O & regional offi ces for preventing unwanted energy usage.

Initiatives taken at the Company''s T&D Division at Nagpur to conserve energy and environment by reducing the consumption of non-renewable energy sources are:

- Installation of drying oven for preheating of materials prior to galvanizing with the help of waste fl ue gases from galvanizing furnace which has reduced fuel consumption by 10%.

- Change in fuel from LDO to Ignite oil and from ignite oil to Liquefi ed Petroleum Gas through liquid off take (LOT) system in galvanizing furnace reduces carbon deposition which minimizes breakdown, gives uniform heating to kettle thereby increasing the life & increase overall effi ciency of the furnace.

- Maintaining power factor towards unity through capacitor bank.

- Transparent polycarbonate sheets provided at shop fl oor roof for usage of Natural light.

- Sewage Treatment Plant is installed to use waste water for gardening.

- Provided 85 Watt CFL in place of 250 Watts Metal Halide at fi nish yard Deoli works.

- Installed air operated diaphragm type pump instead of 10 HP electrical pump to save electrical power.

- Installed heat exchanger for heating of fl ux tank with the help of quench water.

B. Technology Absorption:

Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use and the efforts to develop new techniques continue unabated.

C. RESEARCH AND DEVELOPMENT (R & D):

Increasing focus on developing infrastructure in the country has opened up many opportunities for the construction companies. To rise up to the challenge of completing huge quantum of work in a short time, we have to back up the onsite teams with continual improvement in construction technology. During the year under review the R&D activities undertaken by the company include:

Concreting of lining for pressure shaft of about 1540m length inclined at 30º Development of i) Self compacting concrete (SCC) suitable for lining of inclined pressure shaft, ii) Suitable equipment (Concrete Pump & Pipe line) to withstand pressure upto 250 bars.

Development for Launching scheme for caisson in the sea.

Developments of Form travellers for cable stay bridges.

Development of M60 grade development shotcrete.

Temperature Modeling for high strength mass concrete

In the continued diffi cult economic conditions, cost reductions and early completion of projects remains high on the agenda for every construction company. The opportunities for economizing the designs, improving the productivity, reducing wastage and adopting better construction practices leave a lot of scope for research and technology implementation. There is an urgent need to increase efforts for standardization of equipment, formwork, structural designs and construction procedures.

The current market challenges makes it all the more important not to lose focus on the Research & technology investments as innovating technologies are key to overcome the economic challenges.

Gammon has bagged ACCE(I) L&T Endowment Award 2012 for ''Excellence in Construction of Industrial Structures'' for Design and Construction of 03 nos. NDCT for Indira Gandhi STPP at Jajjarr Haryana & Design and Construction of NDCT at Simhadri Stage II, Vishakhapatnam.

D. Foreign Exchange earnings and outgo:

Total foreign exchange used and earned during the year:

(Rs.in Crores)

Current Period Previous Period

Foreign Exchange Earnings 303.51 235.48

Foreign Exchange Outgo 181.08 109.15

19. ACKNOWLEDGEMENTS:

Your Directors thank all its valued customers and various Government, Semi-Government and Local Authorities, Suppliers and other Business associates. Your Directors appreciate continued support from Banks and Financial Institutions and look forward to their co-operation in the future.

Your Directors place on record their appreciation of the dedicated efforts put in by the employees at all levels and wish to thank the Shareholders and all other stakeholders for their unstinted support and co-operation.

For and on behalf of the Board of Directors

ABHIJIT RAJAN

Chairman & Managing Director

Place : Mumbai

Dated : 12th August, 2013


Mar 31, 2012

The Directors have pleasure in presenting their 90th Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2012.

1. FINANCIAL PERFORMANCE & OPERATIONS:

(Rs.in Crore)

Standalone Consolidated Particulars 2011-2012 2010-2011* 2011-2012 2010-2011*

Profit before Other Income, Depreciation & 459.77 220.94 689.13 406.95 Interest

Add:

Other Income 157.22 280.82 180.86 557.74

Less:

Depreciation 101.99 91.71 242.96 241.23

Interest 363.42 233.65 652.83 459.31

Profit before Tax 151.58 176.40 (25.80) 264.15

Less:

Provision for Taxation 64.54 57.95 95.52 150.10

Profit after Taxation 87.04 118.45 (121.32) 114.05

Transferred to Minority Interest Nil Nil (16.18) (4.03)

Profit for the year 87.04 118.45 (105.14) 110.02

Add:

Profit brought forward from the previous year 341.67 273.36 64.37 40.94

Available for Appropriation 428.71 391.81 (40.77) 150.96

Appropriations:

Transfer to General Reserve 10.00 12.00 19.06 32.21

Transfer to Debenture Redemption Reserve 47.43 45.50 47.43 45.50

Transfer from Debenture Redemption Reserve Nil (19.15) Nil (19.16)

Dividend from Own Shares (0.23) (0.58) (0.23) (0.58)

Transfer to Capital Reserve Nil Nil 0.28 0.99

Transfer to Foreign Currency Translation Reserve Nil Nil 56.46 6.06

Adjustments to Minority Interest Nil Nil 0.58 3.42

Dividend (Proposed) Equity Shares 2.73 10.63 2.73 10.63

Tax on Dividend 0.44 1.74 7.73 7.52

Other Adjustments Nil Nil (1.01) Nil

Balance carried to Balance Sheet 368.34 341.67 (173.80) 64.37

*Figures for the previous period have been regrouped.

The year under review was a difficult period for the construction industry and for the Company. With fewer projects to bid for the order booking was sluggish. Competition continued to be intense due to low entry barriers resulting in smaller players underquoting to capture the projects. Further government inaction, delays in awarding projects, delays in clearances by various government agencies, bureaucratic apathy, rising inflation leading to an increase in prices of major construction raw materials such as steel, cement, bitumen leading to price escalation in contracts, squeeze on liquidity caused by higher interest costs, leading to delay in projects and delay in timely recoveries from clients all had a dampening effect on the overall performance of the Company. The impact led to pressures on the working capital and resulted in higher debt.

The Turnover of the Company on a Standalone basis stood at Rs. 5533 crore for the year ended 31st March, 2012 (Rs. 5558 crore previous year). Operating Profit (PBDIT) amounted to Rs. 460 Crore (Rs. 221 Crore previous year). After providing Rs. 102 Crore (Rs. 92 Crore for the previous year) towards depreciation and Rs. 65 Crore (Rs. 58 crore previous year) towards tax for current and deffered taxation, the net profit amounted to Rs. 87 Crore (Rs. 118 Crore previous year). The annualized percentage decrease in turnover over previous year amounted to 0.04%. The order book position of your Company as on 31st March, 2012 stood at Rs. 15078 Crore.

On a consolidated basis the turnover of the Gammon group stood at Rs. 8038 crore for the year ended 31st March, 2012. The annualized percentage decrease in turnover over previous year amounted to 8%. The group made a Loss of Rs. 105.14 crores for the year ended 31st March, 2012 as compared to a Profit of Rs. 110.02 crore in the previous year. This was mainly on account of increase in interest costs due to higher borrowings.

The recessionary trends in the infrastructure sector continues in the current financial year 2012-13. The Company has posted a Loss of Rs. 19.61 crore during the first quarter ended 30th June, 2012 . The Company has taken several critical steps for improving its funds flow, including strong austerity measures across the Company, the effects of which will be seen in the current financial year.

A review of the performance of various business sectors has been given in detail in the Management, Discussion & Analysis Report which forms part of the Annual Report.

2. DIVIDEND:

The Board of Directors at its meeting held on 14th August, 2012 has, subject to the Shareholder's approval, recommended a final dividend of Rs. 0.20 paise (10%) per share of face value of Rs. 2/- each for the year 31st March, 2012 on the equity shares. The dividend payout for the year under review is Rs. 2.73 Crores.Dividend Distribution Tax aggregates to Rs. 0.44 Crores.

3. DEPOSITORY SYSTEM:

The Company's equity shares are compulsorily tradeable in electronic form. As of 31st March, 2012, 93.01% of the Company's total paid-up capital representing 126,959,750 equity shares is in dematerialized form. In view of the benefits offered by the depository system, members holding shares in physical mode are advised to avail the demat facility.

4. FINANCE:

During the year under review the Company did not raise any funds from the capital markets either by way of issue of equity/ADR/GDR The Company has obtained financial assistance from its consortium bankers to meet its short term working capital requirements.

During the year under review the Company did not raise any debt by way of issue of Secured Non-Convertible Debentures. The Company redeemed debentures aggregating to Rs. 50 Crores. The total amount of outstanding Non-Convertible Debentures as on date is Rs. 324 Crores.

CARE has assigned the following ratings:

Facilities Amount (Rs. in Ratings Crores)

Long Term Bank Facilities 1,100 CARE A

Long / Short Term Bank Facilities 10,400 CARE A / CARE A1

Non-Convertible Debentures 500 CARE A

CP / STD* 900 CARE A1

CP / STD 100 CARE A1

*Carved out of working capital limits.

In the first quarter of this year, a policy change announced by the Finance Ministry, has put severe restrictions on financing of unsecured short term loans, which are a major source of funding for infrastructure companies, in general. Pending regularization through securitization of these loans, the cash flows have been squeezed, with consequent impact on turnover and profitability. Your Company has taken steps to address this issue with its consortium of banks and hopes for an early solution.

5. PUBLIC DEPOSITS:

Your Company did not invite or accept deposits from public during the year under review. 35 deposits (pertaining to previous year) aggregating to Rs. 570,000/- remained unclaimed as on 31st March, 2012. Of the above, 1 deposit amounting to Rs. 15,000/- has since been claimed and paid.

6. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:

During the year under review, the Company has transferred Fixed Deposits amounting to Rs. 70,000/- and Dividend (for the year 2003-04) amounting to Rs. 191,170/- to Investor Education and Protection Fund (IEPF), which was due and payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205C(2), of the Companies Act, 1956.

Unclaimed Dividend for the period ended 31st December, 2004 is due for transfer to IEPF on 1st September, 2012.

7. EMPLOYEE STOCK OPTION SCHEME:

The erstwhile Associated Transrail Structures Limited (ATSL) had introduced an Employee Stock Option Scheme for the benefit of its employees. Pursuant to the amalgamation of ATSL with the Company, effective from 7th July 2009, the said scheme has been taken over by the Company. Details of the stock options granted under the Employee Stock Option Scheme-2007 of erstwhile ATSL are disclosed in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and set out in Annexure 'A' of this Report.

8. SUBSIDIARY COMPANIES:

In addition to the subsidiaries as reported in the previous year the following companies were further incorporated/ acquired as subsidiaries/step down subsidiaries during the year under review:

1. Patna Buxar Highways Limited

2. Vijayawada Gundugolanu Road Project Private Limited

3. Aparna Infraenergy India Private Limited

4. Haryana Biomass Power Limited

During the year under review, the name of Satyavedu Infra Company Private Limited (Company's step down subsidiary) was first changed to Chitoor Infrastructure Projects Private Limited Ltd. and then changed to Earthlink Infrastructure Projects Private Limited. The name of Tada Sez Private Ltd. was first changed to Tada Infrastructure Projects Private Ltd. and then changed to Segue Infrastructure Projects Private Ltd.

During the current financial year, your Company incorporated the following subsidiaries:

1. Patna Water Supply Distribution Network Private Limited

2. Birmitrapur Barkote Highway Private Limited

3. Yamunanagar Panchkula Highway Private Limited

4. Sidhi Singrauli Road Project Limited

The Ministry of Corporate Affairs, Government of India has, vide General Circular No. 2/2011 dated 8th February 2011 read together with General Circular No. 3/2011 dated 21st February 2011, granted exemption under Section 212(8) of the Companies Act, 1956, for not attaching Annual Report of subsidiary companies, subject to fulfillment of certain conditions by the holding company. As stated in the said circulars, copies of the Balance Sheet, Profit & Loss Account, Report of the Board of Directors and Auditors' Report of the subsidiary companies for the year ended 31st March, 2012 have not been attached to the Company's accounts for the year ended 31st March, 2012 as the Company has fulfilled the following conditions:

(i) The Board of Directors, vide its resolution dated 23rd August 2012, accorded its consent for not attaching the balance sheet of the subsidiaries;

(ii) The Company has presented in the Annual Report, the consolidated financial statements of the Company and all its subsidiaries duly audited by its statutory auditors;

(iii) The consolidated financial statements have been prepared in strict compliance with the applicable Accounting Standards and, where applicable, the Listing Agreement as prescribed by the Securities and Exchange Board of India;

(iv) The Company has disclosed in the consolidated balance sheet the following information in aggregate for each subsidiary including subsidiaries of subsidiaries:- (a) capital (b)reserves (c) total assets (d) total liabilities (e) details of investment (except in case Of investment in the subsidiaries) (f) turnover (g) profit before taxation

(h) provision for taxation (i) profit after taxation (j) proposed dividend;

(v) The annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the Company and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the head office of the Company and of the subsidiary companies concerned and a note to the above effect has been included in the Annual Report of the Company. The Company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand;

(vi) The Company as well as its subsidiary companies in question shall regularly file such data to the various regulatory and Government authorities as may be required by them;

(vii) The Company has given Indian rupee equivalent of the figures given in foreign currency appearing in the accounts of the subsidiary companies along with exchange rate as on closing day of the financial year;

The Financial Statements of the subsidiary companies are available for inspection by the shareholders at the registered office of the Company. Shareholders who wish to have a copy of the accounts of the subsidiaries will be provided the same on receipt of written request from them.

9. DIRECTORS' COMMENTS

With reference to the Auditors' qualification in point no. 5 of their report dated 14th August, 2012 on the Standalone Financial Statements for the year ended 31st March, 2012 read together with their qualification in point no. 8(b) of their Report dated 23rd August, 2012 on the Consolidated Financial Statements for the year ended 31st March, 2012 with respect to certain contingent liabilities amounting to OR 615637 (Rs. 8.26 Crore) of the Company's Joint Venture in Oman, the Board would like to inform the members that the Joint venture has appealed in the higher court and based on legal advice obtained your management is confident that the contingent liability would not result in an obligation to the Company.

With reference to the Auditors' observation in point no. 3(c) of their report dated 14th August, 2012 on the Standalone Financial Statements for the year ended 31st March, 2012 and point no. 9 (c) of their Report dated 23rd August, 2012 on the Consolidated Financial Statements for the year ended 31stMarch, 2012 relating to excess managerial remuneration paid, the Directors would like to inform the members that remuneration paid to the aforementioned Directors during the Financial Year 2011-2012, though approved by the Shareholders, has exceeded the limits as prescribed under Section 198 and 309 read with Schedule XIII of the Companies Act, 1956 for that year and the Company is seeking Shareholders' approval and the approval of the Central Government for payment of the remuneration to the Directors as "Minimum Remuneration" for the Year 2011-2012.

With reference to the Auditors' qualification in point no. 8(a) of their Report dated 23rd August, 2012 on the Consolidated Financial Statements for the year ended 31st March, 2012 with respect to the extent of recoverability of receivables in Dubai from the debtors including retention aggregating to AED 37.30 millions i.e. Rs. 52.63 crore, the Board would like to inform the members that the management is of the opinion that the amount is contractually recoverable and the component company is in negotiations with the client and hence no provision is made towards the same.

With reference to the Auditor's observations in point no. xxi of the annexure to their Audit Report dated 14th August 2012, your Board would like to inform the members that during internal investigations by the management instances of malafide conduct by certain employees were observed at two sites by the company. The management has lodged an FIR on some counts and is in the process of filing FIR on other counts. The total quantum of amount attributable to malafide conduct is yet to be determined and finalised and will crystallise on completion of investigation jointly with the Authorities. The Management does not expect any impact on the financials as all possible losses attributable to the matter have already been booked and appropriate intimation towards fidelity insurance have been given to the Insurance Company. Further necessary steps have been initiated and all systems, processes and procedures at the sites are being reviewed and modified to strengthen them as well as additional approval levels at various stages of operations have been implemented so as to avoid the recurrence of such instances in the future.

10. AUDITORS:

M/s. Natvarlal Vepari & Co., Chartered Accountants, Firm Registration no. 106971W, Statutory Auditors of the Company retire at the ensuing Annual General Meeting and are eligible for re-appointment. A certificate to the effect that their appointment, if made, will be within the prescribed limits u/s 224(1B) of the Companies Act, 1956 has been obtained from them

The Board on the recommendation of the Audit Committee, recommends the re-appointment of M/s. Natvarlal Vepari & Co., Chartered Accountants, Firm Registration no. 106971W as the Statutory Auditors of the Company and also as the Branch Auditors, Oman Branch and any other branch for the year 2012-13, subject to approval by the Shareholders.

The Board also on the recommendation of the Audit Committee, recommends the re-appointment of M/s. Vinod Modi & Associates, Chartered Accountants, Firm Registration no. 111515W and M/s. M. G. Shah & Associates, Chartered Accountants, Firm Registration no. 112561W, as the Joint Branch Auditors of 'Gammon India Limited - Transmission& Distribution Business Headquarters, Nagpur' subject to approval by the Shareholders.

11. REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS:

Report on Corporate Governance and Management Discussion and Analysis Report for the year under review, together with a Certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance,as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

12. CONSOLIDATED FINANCIAL STATEMENTS:

Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Clause 32 of the Listing Agreement entered into with the Stock Exchanges and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard.

13. DIRECTORS:

Mr. Rohit Modi resigned as the Deputy Managing Director of the Company with effect from 31st May, 2012 and also ceased to be a member of the Board of Directors. The Board places on record its sincere appreciation for the valuable contributions made by Mr. Rohit Modi during his tenure as the Deputy Managing Director of the Company.

Mr. Rajul A. Bhansali, Executive Director - International Operations, whose term ended on 29th March, 2012, was re-appointed as a Whole-time Director of the Company designated as Executive Director - International Operations for a term of 3 (three) years with effect from 30th March, 2012. The shareholders have, by way of Postal Ballot, the results of which were declared on 24th April 2012, approved the aforesaid re-appointment.

Mr. D. C. Bagde - Executive Director, whose term ended on 8th July, 2012, was re-appointed as a Whole-time Director of the Company designated as Deputy Managing Director - Transmission & Distribution Business for a term of five (5) years with effect from 9th July, 2012. The Company has sought the shareholders' approval for the aforesaid re-appointment by way of Postal Ballot, the results of which will be declared on 29th August, 2012.

Pursuant to the provisions of Section 256 of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Atul Dayal and Ms. Urvashi Saxena retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Brief profiles of the proposed appointees together with other disclosures in terms of Clause 49 of the Listing Agreement are part of the Annexure to the Notice of the Annual General Meeting.

14. DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217 (2AA) of the Companies (Amendment) Act 2000, the Directors confirm that:

1. The applicable accounting standards have been followed by the Company in preparation of the annual accounts for the period ended 31st March, 2012;

2. The Directors have selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the profits of the Company for the year ended on that date;

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The annual accounts for the year ended 31st March, 2012 have been prepared on a going concern basis.

15. HEALTH, SAFETY & ENVIRONMENT:

Continual strengthening on Construction Safety activities across Gammon sites and HQ remained the main focus during the year 2011-12 through a multipronged approach. Improvements have been achieved by strengthening the reporting and analysis of incidents & accidents, strengthening of safety surveillance, internal site reviews, independent review cum exchange, visits of projects, utilization of exchange of experience gained through safety coordinators meets, encouragement for excellence in safety through NSC Safety Award scheme. Development of additional safety documents like safety management manual, safety operating manual, training module for safety personnel, system for submission of periodic reports of sites through LAN are in good progress. Periodic reports of sites, strengthening of audit inspections were achieved. Conducted training on various aspects of Construction Safety, Safety awareness programmes etc. through various means & methods were achieved during National Safety Week and other appropriate similar occasions by involvement of all level of employees. Regular activities like safety surveillance, safety training, safety promotional activities and conducting emergency fire drills etc. were maintained. For achieving excellence in safety, awareness programme and implementation programs on work at height, basic scaffold safety requirements, Electrical Safety, Safety In charge Development, Safety Supervisor Development programmes were conducted across the organization. Evaluation and enhancement programs on Safety culture were continued.

Various Safety Initiatives taken during the year under review included:

- Conducting Corporate Safety Committee meeting.

- Sector wise Safety Committee set up & its meeting/ follow up.

- Competency Mapping of Safety Staff.

- Eligibility criteria of Safety Staff for recruitment defined.

- Safety I/c Training - covered all Safety I/c.

- Safety Supervisor Training - 32% covered &on going.

- Safety Coordinator Nominations & Strategy Workshop.

- Safety Alerts - For information on Fatal/Serious Incidents.

- Standard Signages Posters developed & dispatched.

- Safety inspections/Audits conducted & ongoing by Coordinators.

16. RESEARCH & DEVELOPMENT:

Increasing focus on developing infrastructure in the country has opened up many opportunities for the construction companies. To rise up to the challenge of completing huge quantum of work in a short time, we have to back up the onsite teams with continual improvement in construction technology. During the year under review the R&D activities undertaken by the company include:

- Designing high performance concrete for Chennai Metro Rail Project.

- Considering the continuous scarcity of river sand in Mumbai region we have established mix designs with 100% crushed sand for all grades of concrete.

- Preparing guideline for concrete mix design using different supplementary cementitious material.

- Designing high strength concrete with ultrafine GGSB instead of conventional use of micro silica.

- Working on designing Self Compacting Concrete for Precast Segments.

- Working on M60 grade dry shotcrete..

The company has also bagged the ACCE Bhagawati 2011 Award for Design of the power plant structures.

17. PARTICULARS OF EMPLOYEES:

The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all shareholders, excluding the statement of particulars of employees. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company.

18. PARTICULARS UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988:

A. Conservation of Energy:

Conservation of energy in all possible areas is undertaken as an important means of achieving cost reduction. Savings in electricity, fuel and power consumption receive due attention of the management on a continuous basis and as a result, some initiatives for energy management are being undertaken at sites as mentioned below:

(i) Using portable transformers instead of running DG sets.

(ii) Using APFC Panel with grid power for improvement of PF value.

(iii) Using of CFL instead of incandescent lamp.

(iv) Incorporating float switch with pump.

(v) Using grid power instead of DG at A-V during 7 months unproductive period.

(vi) Energy audit & control over redundant running.

Initiatives taken at the Company's T&D Division at Nagpur to conserve energy and environment by reducing the consumption of non-renewable energy sources are:

- Installation of drying oven for preheating of materials prior to galvanizing with the help of waste flue gases from galvanizing furnace which has reduced fuel consumption by 10%.

- Change in fuel from LDO to Ignite oil and from ignite oil to Liquefied Petroleum Gas through liquid off take (LOT) system in galvanizing furnace reduces carbon deposition which minimizes breakdown, gives uniform heating to kettle thereby increasing the life & increase overall efficiency of the furnace.

- Maintaining power factor towards unity through capacitor bank.

- Transparent polycarbonate sheets provided at shop floor roof for usage of Natural light.

- Sewage Treatment Plant is installed to use waste water for gardening.

- Provided 85 Watt CFL in place of 250 Watts Metal Halide at finish yard Deoli works. .

- Installed air operated diaphragm type pump instead of 10 HP electrical pump to save electrical power.

- Installed heat exchanger for heating of flux tank with the help of quench water.

B. Technology Absorption:

Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use and the efforts to develop new techniques continue unabated.

C. Foreign Exchange earnings and outgo:

Total foreign exchange used and earned during the year:

(Rs. in Crores) Current Period Previous Period 31st March, 2012 31st March, 2011

Foreign Exchange Earnings 235.48 165.53

Foreign Exchange Outgo 109.15 146.87

19. ACKNOWLEDGMENTS:

Your Directors thank all its valued customers and various Government, Semi-Government and Local Authorities, Suppliers and other Business associates. Your Directors appreciate continued support from Banks and Financial Institutions and look forward to their co-operation in the future.

Your Directors place on record their appreciation of the dedicated efforts put in by the employees at all levels and wish to thank the Shareholders for their unstinted support and co-operation.

For and on behalf of the Board of Directors

ABHIJIT RAJAN

Chairman & Managing Director

Place: Mumbai

Dated: 23rd August, 2012

 
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