GAMMON INDIA LIMITED

In April 2008, ATSL, which has been amalgamated with our Company, paid €1.38 million for a 100.00%
stake in SAE Powerlines. However, for the year ended December 31, 2008, Sofinter, FTM and SAE
Powerlines made losses of €41.69 million, €17.66 million and €2.77 million, respectively. There is no
assurance that these companies will turn profit-making in the near future, or at all. If these subsidiaries
continue to incur losses in the future, our financial condition and results of operations may be adversely
affected.
Our failure to successfully integrate Sofinter, FTM and SAE Powerlines may adversely affect our
business, financial condition and results of operations and we may not be able to realize significant
benefits from the acquisition.
We may be unable to successfully manage the businesses of Sofinter, FTM and SAE Powerlines in terms
of technology, personnel, procedures, policies and processes. Although we expect to realize certain
synergies and take initiatives that draw on the strengths of the companies, we cannot assure you that we will
realize significant operating or marketing synergies or that any such benefits will occur within any
particular time frame. Realization of operating and marketing synergies could also be affected by risks that
are beyond our control.
Due to our relative inexperience in certain types of projects and product and service offerings, we might not
be successful in integrating the businesses of Sofinter, FTM and SAE Powerlines into our existing lines of
business. Before acquiring the entities in Italy, we have limited experience in manufacturing power and
industrial equipments as well as managing international operations. If we are unable to compete effectively
for projects in these sectors, or if we are unable to execute the projects efficiently, our operations could be
affected by financial losses suffered in these projects or our reputation may suffer. These new lines of
business along with our existing businesses may turn out to be mutually disruptive and may cause an
interruption to, or a loss of momentum in, our business in a number of areas. Our inability to manage new
business may also adversely affect our growth strategy and revenue prospects, having a material adverse
effect on our financial condition.
Our operations in foreign countries are subject to political, economic, regulatory and other risks of doing
business in those countries.
We have international operations, currently centered in Europe, and we have plans to further expand our
operations to other jurisdictions. Consequently, we are subject to the jurisdiction of different tax and
regulatory authorities. As some of our clients are foreign government-owned entities, we are subject to
additional risks, such as risks associated with uncertain political and economic environments and
government instability, as well as legal systems, laws and regulations that are different from the legal
systems, laws and regulations with which we are familiar in India. In addition, we could be subject to
expropriation or deprivation of assets or contract rights, foreign currency restrictions, exchange rate
fluctuations and unanticipated taxes or encounter potential incompatibility with foreign joint venture
partners. Our international operations are also vulnerable to the economic conditions in such countries. For
example, the construction industry in Europe experienced a slowdown as a result of the recent global credit
crisis.
We are currently executing projects in Africa, Europe and the Middle East and some of our employees
travel to these countries. In order to manage our day-to-day operations, we must overcome social, cultural
and language barriers and assimilate different business practices. In addition, we are required to create
compensation programs, employment policies, codes of conduct and other administrative programs that
comply with the laws and customs of these jurisdictions. Our failure to manage our geographically diverse
operations successfully, including our ability to react quickly to changing business and market conditions
and comply with a range of industry and legal standards and procedures, could adversely affect our business
and operations.
Our manufacturing operation and reputation may be affected by potential product liability claims,
litigation, complaints or negative publicity in relation to our products’ quality and safety.
If our products fail to perform as expected, or prove to be defective or result in industrial accidents, personal
injuries, casualties or financial losses to our customers, we may be subject to liability claims for damages. If
our products do not meet the specifications and requirements requested by our customers, or if any of our
products are defective, such defects and any complaints or negative publicity resulting therefrom could
9