GAMMON INDIA LIMITED

is typically joint and several. If our joint venture partners fail to perform these obligations satisfactorily, the
joint venture may be unable to perform adequately or deliver its contracted services. In such cases, we may
be required to make additional investments or provide additional services to ensure the adequate
performance and delivery of the contracted services as bid documents typically provide that we are jointly
and severally liable to clients as a member of such joint ventures in our projects. These additional
obligations could result in reduced profits or, in some cases, significant losses for us. The inability of a joint
venture partner to continue with a project due to financial or legal difficulties could mean that we would
bear increased and possibly sole responsibility for the completion of the project and bear a correspondingly
greater share of the financial risk of the project. In some cases, we may not be able to provide the services
which our joint venture partners have failed to provide, due to our lack of experience or expertise in certain
areas and we may not be successful in finding suitable substitute partners.
In addition, we may also need the cooperation and consent of our various joint venture partners in
connection with the operations of our joint ventures, which may not always be forthcoming. We may have
disagreements with our joint venture partners regarding the business and operations of the joint ventures.
We cannot assure you that we will be able to resolve such disputes in a manner that will be in our best
interests, especially where we have minority stakes in the joint ventures. If we are unable to successfully
manage relationships with our joint venture partners, our projects and our profitability may suffer. In
addition, our joint venture partners may have economic or business interests or goals that are inconsistent
with ours. Any of these factors could adversely affect our business, financial condition and results of
operations.
Sub-contracted projects can be delayed on account of the principal or sub-contractor’s performance,
resulting in delayed payments.
We sub-contract work on many of our projects. A completion delay on the part of a principal or
subcontractors, for any reason, could result in delayed payment to us. The execution risks we face in
subcontracted projects include:
our sub-contractors may not be able to complete the project construction on time, within budget or
to the specifications and standards that have been set in the contracts;
our sub-contractors may not be able to obtain adequate working capital or other financing on
favorable terms as and when required to complete construction;
where we sub-contract, we may not be able to pass on certain risks to sub-contractors such as
unforeseen site and geological conditions which may make the site unsuitable for the project;
as we expand geographically, we may have to use sub-contractors with whom we are not familiar,
which could increase the risk of cost overruns, construction defects and failures to meet scheduled
completion dates; and
where we sub-contract work, we are required to supervise and remain responsible for the subcontracted
work which means clients still have recourse to us in respect of actions, omissions and
defects by our sub-contractors.
Further, our clients may appoint other contractors at the project sites with whom we are required to
cooperate and coordinate. Any delay or breach by a contractor or sub-contractor of its obligations under the
contract may lead to delay or default by us, resulting in a material adverse effect on our business and results
of operations. Furthermore, after the relevant Government entity hands over the possession of the land to us,
the previous inhabitants may dispute our right over the property, which in turn may require us to incur
substantial cost and time and have an adverse impact on our business and results of operations.
We have pledged or have agreed to pledge and will continue to pledge our shares in our subsidiaries or
SPVs in favor of lenders, who may exercise their rights under the respective pledge agreements in events
of default.
We have pledged, or have agreed to pledge our shareholding in our subsidiaries or SPVs in favor of the
respective lenders as security for the loans provided to these companies. For example, as of March 31, 2009
we have pledged all the shares we hold in Gammon International B.V., Gammon Holding B.V. and ATSL
Holdings BV, Netherlands in favor of ICICI Bank Canada and we, along with GIPL, have pledged 51.00%
of the shareholding of Rajahmundhry Expressway Limited in favor of IDBI Trusteeship Services Limited.
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