Debt-laden civil contractor Gammon India has accepted the proposal from Thailand-based GP Group to sell a controlling stake in Gammon’s engineering, procurement and construction (EPC) business for R250 crore.
In a filing to BSE, the company said that the board of the company “considered and accepted the proposal from GP Group, Thailand to invest in the company’s Civil EPC by investing in the company’s wholly owned subsidiary, Gammon Retail Infrastructure Private (GRIPL)”.
As part of the agreement, GP Group shall invest a sum of R250 crore, of which R26 crore is to be invested on completion of business transfer agreement and balance R224 crore upon completing the scheme of arrangement for acquiring upto 75% stake in GRIPL.
The sale of EPC business forms part of the company’s efforts to repay the CDR lenders. Gammon India’s CDR package of R13,000 crore in 2013, was among the largest approved in the last two years.
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 the domestic and overseas subsidiaries.
However the progress on company’s asset monetisation programme and sale of foreign businesses has remained very slow. The signing of agreement for the sale of EPC business, is the first in a series of asset sales that the company needs to undertake to repay the banks.
On November 23, lenders had decided to initiate strategic debt restructuring or 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 R42,807 and TLL reported a net loss of R89.3 lakh.
In December, the consortium of eight banks had become the largest shareholder of Gammon India in the public shareholder category. As on March 9, banks stake in Gammon India had gone up to 55.43%, which was further upped to 63.41% as on March 18, according to the shareholding pattern on BSE. The shareholding under financial institutions/banks stood at 2.18% as on September 30.
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 ten 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.
The company’s gross debt at the end of March 2014 stood at R11,061 crore, up 15.4% over March 2013, Bloomberg data showed. In FY14, the company reported a consolidated net loss of R729 crore on the back of R3,763 crore in revenues.
The finance costs stood at R699 crore. The company has not reported its 2015 earnings numbers.
The company is promoted by Abhijit Rajan (2.24%) who is also its chairman and managing director and other promoters include Pacific Energy Private (4.93%), Devyani Estate and Properties (3.33%) among others. Their stakes have come down to present levels from 5.99%, 13.20% and 8.93% respectively, at the end of September 2015.
Gammon India plans to divest 30% in Gammon Infra Projects
Gammon India will be divesting up to 30% stake in its listed infrastructure arm Gammon Infrastructure Projects (GIPL), held through its wholly owned subsidiary Gammon Power Limited (GPL), said a BSE notice. Company’s board has approved the divestment, which will be done in one or more tranches. “This divestment will be done at such times and in such manner as the board /duly constituted committee of directors, may approve, on the floor of the stock exchanges, at the price prevailing on the exchanges on the date of such sale,” the company said. fe Bureau