GAMMON INDIA LIMITED

RISK FACTORS
An investment in equity shares involves a degree of risk. You should carefully consider all the information
in this Placement Document, including the risks and uncertainties described below and the information
under “Forward-Looking Statements”, before making an investment in the Equity Shares. If the following
risks actually occur, our business, results of operations and financial condition could suffer, and the price
of the Equity Shares and the value of your investment in the Equity Shares could decline. Unless specified
or quantified in the risk factors below, we are not in a position to quantify the financial implications of any
of the risks mentioned below. Additional risks not described below or not currently known to us or that we
currently deem immaterial may also adversely affect the market price of our Equity Shares.
Risks Related to Our EPC and Construction Business
Our EPC and construction business is exposed to risks associated with cost overruns or underestimations
in our fixed price, turnkey and item rate contracts.
While a majority of our contracts contain a price escalation clause, some of our contracts are fixed-price
contracts. In the case of turnkey contracts, we generally agree to deliver completed facilities which are in a
ready-to-operate condition. Our contracts may lack provisions relating to adjustment as a result of change in
material and labor costs. Contract prices are based on a number of assumptions underlying our bids for such
contracts as well as the competition we face while bidding for the projects. If any of these estimates prove
to be inaccurate, or circumstances change, cost overruns could occur and we would experience reduced
profits or, in some cases, losses. In addition to any incorrect estimates as a result of incorrect internal
projections, variations in the costs from those estimated by us could be caused by various factors, including:
changes in economic conditions;
increases in the price and availability of labor, equipment and materials;
failure in the supply of materials, services and finished goods from third parties;
unanticipated changes in engineering design of the project;
inaccuracies of drawings and technical information on which bids were based;
unforeseen design and engineering construction conditions, site and geological conditions, which
may result in delays;
inability to obtain requisite environmental and other approvals;
delays in the delivery of equipment and materials to the project site;
unanticipated increases in equipment costs;
accidents at our project sites or in surrounding areas;
changes in applicable taxation structure; and
delays caused by local and seasonal weather conditions.
Under item rate contracts, we quote rates for individual items of work based on a schedule of quantities or
bill of quantity (“BOQ”), which is furnished by our customers. The BOQ is an estimate of the quantity of
activities involved and these quantities may be varied by the parties during the course of the project, without
any corresponding change in consideration.
These factors could adversely affect our profitability on the affected contracts, and may result in reduced
profitability or losses on our projects. Depending on the size of such projects, the resulting deviation from
estimated contract performance could have a significant effect on our results of operations.
Our EPC and construction business requires a considerable amount of working capital as well as
investment in plant and equipment and we may be unable to adequately finance such capital needs
through cash generated from our operations, advances from the clients and short-term bank borrowings.
Our EPC and construction business requires a considerable amount of working capital to build, maintain
and operate. We also require considerable capital to acquire new equipment and implement new
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