Annual Report 2006-2007 - Gammon India

GAMMON INDIA LIMITED
In addition, the process of estimation is continuously reviewed with a view to make the bid realistic. This is
of special significance in light of the severe competition prevailing in the Industry today which is exerting
immense pressure on margins.
2. Defaults in payment of running bills and retention money by some of the clients put pressure on the
working capital requirements of the Company and pushes up the financial costs. The Company evaluates
client risks and would generally seek payment comfort through instruments like Letter of Credit, Bank
Guarantee etc. where risk perception is high.
3. The Company is increasingly focusing on the International markets as a strategic initiative. This is a new
dimension to the risk which the Company is subjected to and in addition to better bidding and project
management processes a deep understanding of local complexities is essential to succeed in these
markets. The Company addresses these risks by secondment of trained and competent personnel,
engaging specialized agencies locally for proactive guidance and partnering with local business groups of
repute in Joint Ventures.
4. The Company has in place adequate and comprehensive insurance covers for all its assets and projects
to deal with calamities.
5. The Company has been consistently rated with AA+ in debt markets for its long-term borrowings. This
facilitates quick access to the financial markets at competitive rates as and when required. The Leveraging
of the Company is comfortable to meet its obligations.
6. The Company has inflows and outflows in foreign currency related to its Projects. In addition, it has foreign
currency denominated borrowings. To the extent that the overall position exceeds the natural hedge,
the Company evaluates and puts in place a hedging strategy, for which it is adequately equipped with
necessary mandates at the operating level.
7. The internal audit cell of the Company has in place a comprehensive program across the Company.
The internal controls of the Company are robust to quickly detect and minimize the risks of fraud and
misreporting. The reports of the Internal Audit Cell and the internal controls are regularly reviewed by Audit
Committee of the Board and their recommendation for better effectiveness implemented.
7. Internal Control Systems and their Adequacy :
Extensive and time tested internal control systems are followed by the Company across the entire gamut of its
activities.
Financial controls operate through in-house and continuous internal audit, ERP System and distribution of
functional responsibilities. Wherever necessary assistance is taken from independent professional firms to
augment the system controls.
Operational controls exist through well laid out systems of checks and balances and hierarchy of reporting
from site-level to central management groups to the senior management and the Directors.
Monitoring group gives timely and periodical information on actual performance as compared to estimates to
the senior management and supports performance appraisals.
8. Technology Upgradation :
Your company views IT as a strategic tool to enhance its business values and enable new ways of doing
business. Your company has continued to leverage information technology for business values and to create
capabilities for the future.
Your company is in the midst of strengthening it’s IT infrastructure in terms of WAN (VSAT & Broadband). It
has successfully implemented a VSAT Network as a CUG (closed user group) to bring IT to the most remote of
project sites. The Company now has a core virtual private network using high bandwidth VSATs supplemented
by MPLS technology for the remote locations.
42