GAMMON INDIA LIMITED

esult in decreased sales of our products, and we may also be subject to product liability claims and
litigation. As a result, we may incur significant legal costs regardless of the outcome of any claim of alleged
defects. Lawsuits are inherently expensive to defend and will divert management and other resources from
our business operations, which could in turn materially and adversely affect our business, financial position
and results of operations.
Risks Related to Our Business in General
An increase in the cost of materials used for our construction and manufacturing businesses may
adversely affect our results of operations.
Our business is affected by the availability, cost and quality of the raw materials such as steel and cement,
which are used to construct and develop our projects. Steel is also an important raw material in our
manufacturing business. In the terms of our agreements, we may be responsible to make arrangements for
supply of raw materials and ensure that they meet the requisite quality standards. The prices and supply of
these materials depend on factors which are not within our control, including general economic conditions,
competition, production levels, transportation costs and import duties. In general, steel and cement
accounted for a significant amount of our total project costs.
We purchase our raw materials from external suppliers. We also employ third party contractors to process
or manufacture some of the components that we design. To meet our construction and completion
schedules, we must obtain sufficient quantities of raw materials on a timely basis at commercially
reasonable terms. Any shortage of or delay in supplies of steel and cement may cause disruption to our
operations. Any unfavorable change in prices of the raw materials or the raw materials not meeting the
requisite quality standards, may lead to increase in costs, delay in implementation of projects and
consequently having a material adverse effect on our business and results of operations.
Delays in the completion of current and future projects could have an adverse effect on our financial
condition and operating results.
Typically, our projects are subject to specific completion schedule requirements. We provide our customers
with performance guarantees which require us to complete our projects within a specified timeframe. Our
EPC, construction and infrastructure development projects are typically required to completed or achieve
commercial operation no later than the scheduled date specified under the relevant contracts, subject to
certain exceptions such as the occurrence and continuance of force majeure events that are not within the
control of our project companies. Failure to adhere to contractually agreed timelines for reasons other than
specifically contemplated in such contracts could result in us or one of our project companies being required
to pay liquidated damages or penalty amounts, lead to forfeiture of security deposits, or performance
guarantees being invoked. Rates of liquidated damages would ordinarily range between 5.00% and 15.00%
of the total project costs. In some cases, our customers may be entitled to appoint, at our expense, third
parties to complete the work.
There can be no assurance that we will be able to complete our current and future projects within specified
schedules or at all. Timely completion of these projects is subject to various execution risks as well as other
matters, including securing financing and the relevant approvals for such projects. For infrastructure
projects under development or in the award stage, the agreements or the letters of award also require that the
project companies achieve financial closure by a date specified in the relevant concession agreement. We
have applied for extensions of project completion dates in certain of our contracts and are yet to receive
such consents. We cannot assure you that we will not be required to pay liquidated damages in relation to
these extensions.
Our contracts generally contain a provision of defects liability period, during which we are responsible for
any defects in the construction after the commercial operations date. Any delay in our projects would
consequently postpone the defects liability period, leading to an increase in cost and interest.
Delays may result in cost overruns, lower returns on capital and reduced revenue for the project companies,
as well as failure to meet scheduled debt service payment dates and increased interest burdens from our
financing arrangements for the projects. Our clients can impose penalties and liquidated damages in respect
of delays and deducted these amounts from the contractual price payable to us. Our project lenders may also
impose additional restrictive covenants or other less favorable terms where existing financing arrangements
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