GAMMON INDIA LIMITED

performance, the customer may delay or withhold payment to us. If we were ultimately unable to collect on
these payments, our profits would be reduced.
Our failure to successfully defend the claims may require us to incur substantial costs in payment of
compensation and damages, and may result in delay or reduction in expected revenues from the project,
which in turn may result in an adverse impact on our financial condition and results of operations.
The dangerous nature of our EPC and construction business may cause injury to people or property that
may lead to significant disruption in our business.
Our business requires our employees to work under potentially dangerous circumstances. Despite
compliance with requisite safety requirements and standards, any unforeseen circumstance could cause
injury to our employees, contract labors or other persons, cause damage to our properties and properties of
others and harm the environment. We may also be liable for certain costs related to hazardous materials,
including claims and litigation for injuries arising from occupational hazards at our project sites. This could
subject us to significant disruption in our business and to legal and regulatory actions against us, which
could adversely affect our business, financial condition and results of operations.
In July 2009, while performing works at Jamrudpur site under the contract granted by Delhi Metro Rail
Corporation Limited (“DMRC”), one of the cantilevers failed resulting in the death of seven persons and
injury to 14 persons and damage to property. Thereafter, during the cleaning operations, three cranes failed.
This lead to injury to six construction workers. DMRC has issued a show cause notice to the Company
inquiring why GIL and its allied/sister concerns/ and partners on DMRC should not be blacklisted for a
period of two years. The Company has responded to the said notice. For details, see ‘Legal Proceedings –
Notice’. Two first information reports have also been lodged against the Company on July 12, 2009 and
July 13, 2009. We cannot assure that the DMRC would not blacklist us. Blacklisting could cause loss of
ongoing and potential projects leading to a material adverse effect on our operations and financial
condition. We may become ineligible to bid for other projects. This could adversely affect our financial
condition and market share.
Any accident on a project site may lead to a delay or disruption in the ongoing works, resulting in a delay
in completion of the project, for which we may have to pay liquidated damages. Also, we may be required
to pay compensation to the parties affected by the accident, including the workers. Compensation
approximately aggregating to Rs. 9,610,000 has been deducted from our consideration for the aforesaid
accidents. We may also be involved in prolonged litigation or an alternative dispute resolution mechanism
which could have cost as well as time implications. Our customers may also blacklist us or terminate the
contract, leading to a loss of work and unavailability of funds which could have a material adverse effect
on our business and financial condition. Any accident could also adversely affect our goodwill and
reputation leading to a loss of potential clients resulting in material adverse affect on business and market
position.
Risks Related to Our Infrastructure Development Business
Given the long-term nature of our infrastructure development projects we undertake, we face various
kinds of implementation risks.
Most of our infrastructure development projects that we undertake involve agreements that are long-term in
nature. Our subsidiary, GIPL, derives all of its revenues from long-term concession or license agreements
ranging from 15 to 30 years. The long-term nature of these agreements exposes us to a variety of
implementation risks, including construction delays, delay or disruption in supply of raw materials, delays
in acquisition of land, unanticipated cost increases, cost overruns, unavailability of manpower, change in
government policies and disputes with our joint venture partners.
Economic conditions may materially change over the life of one or more of our concession or
implementation agreements and we may not have the ability to modify these agreements to reflect these
changes. Further, our commitments and obligations under these agreements may restrict our ability to
implement changes to our business plan, including reducing our shareholding in the relevant SPVs. This
may limit our business flexibility, expose us to an increased risk of unforeseen business and industry
changes and could have an adverse effect on our business, financial condition and results of operations.
5