Annual Report 2006-2007 - Gammon India

k. Bio-mass based Power project in Haryana
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Annual Report 2006-2007
Gammon in a consortium with Bermaco Energy Systems Limited has been awarded 8 biomass based
Power Projects in various districts in Haryana state. Each of these projects involve the development of
approximately 12 MW power projects based on biomass fuel of rice straw. The total project installed
capacity would be in the range of 55-60 MW and the total project cost for all 8 projects together would be
about Rs. 450 Crores.
l. Mumbai Offshore Container Terminal
Gammon in consortium with Dragados S.P.L. (a port operator from Spain) is the preferred bidder for the
container terminal project involving operations and management of the existing Mumbai Port container
terminal for initial 5 years and development, including construction, equipping, operations and management
of the offshore container terminal, comprising at least two berths. The estimated Project cost is about
Rs. 800 crores in the initial phase of 3 years and another possible Rs. 400 crores subsequently, thus
aggregating about Rs. 1200 crores. The Project is on a BOT basis for 30 years, including 3 years of
construction & equipping period. This is the first container privatisation at the Mumbai Port and the single
largest privatization project bagged by Gammon.
m. Tidong II Hydropwer generation project in Himachal Pradesh
This is a 40 year concession excluding construction wherein Gammon is the preferred bidder and has
received the LOI recently for developing a 60 MW hydro-power project in the state of Himachal Pradesh.
The estimated project cost is about Rs. 350 crores. The project is in partnership with Torrent Power.
5. Financial and Operational Performance :
The Turnover of the Company stood at Rs. 2084.33 Crores for the year ended 31 st March, 2007. Operating
profit (PBDIT) amounted to Rs. 191.85 Crores (Rs. 195.36 Crores). After providing Rs. 35.22 Crores (Previous
Year – Rs. 37.10 Crores) towards Depreciation and Rs. 44.70 Crores (Previous Year – Rs. 8.33 Crores) towards
tax for current and deferred taxation, the net profit amounted to Rs. 98.36 Crores (Rs. 102.83 Crores). The
annualised percentage increase in net profit over previous year amounted to 20%. The order book position of
your company as on 31 st March, 2007 was over Rs. 7000 crores. Some important financial statistics and ratios
are stated below :
Debt Equity Ratio 0.41:1
Face Value of Share Rs. 2/- per share
Book Value of Share (Without Revaluation Reserves) Rs. 103.46 per share
Earnings Per Share :
Basic Rs. 11.34
Diluted Rs. 11.24
6. Risk Management :
The core business of the Company is infrastructure and includes engineering, procurement & construction of
Projects. Typically the duration for completion of these projects ranges between 1-4 years. Also many of these
projects are on lump sum basis while the others are on fixed item basis and geographically wide spread. In
light of these features management of risk assumes great significance and the Company has in place a frame
work for the same.
Key risks that the Company manages proactively are listed here below :
1. Given the duration of execution, which as mentioned above typically ranges from 1-4 years, the costs
increase due to inflationary pressures. To the extent that the contract provides for escalation the impact of
these cost increases gets mitigated. In case, the contract does not have an escalation clause, increases
are extrapolated in the estimates at tender stage to cater for the same should they arise. In both the
situations, nevertheless, the key to manage the risk is in timely execution, which would not only ensure that
costs are contained but also that penalties are obviated. To this end, the Company continuously reviews
its business processes to strengthen its project management capabilities, tighten contract management,
improve information flow and manpower retentions and enhance client relationship.