GAMMON INDIA LIMITED

the tender, the contract is usually awarded to the most competitive financial bidder. Our industry has been
frequently subject to intense price competition. This competitive bidding process may have an adverse
affect on the profit margins that we are able to attain. See “Business — Competition”, for more details on
competition in the Indian construction industry.
Some of our competitors are larger than us and have greater financial resources. They may also benefit from
greater economies of scale and operating efficiencies. Competitors may, whether through consolidation or
growth, present more credible integrated and/or lower cost solutions than we do. Our competitors with
greater financial resources and greater economies of scale may be able to pre-qualify in their own right
and/or attract a joint venture partner more easily than us. See ― Risk Factors — If we cannot bid in our own
right, and we are unable to find suitable joint venture partners, we may be ineligible for bidding for certain
contracts and projects.‖ There can be no assurance that we can continue to compete effectively with our
competitors in the future, and any such failure may have an adverse effect on our business, financial
condition and results of operations.
EPC and construction projects could be subject to construction and operational risks.
EPC and construction projects could involve various risks, such as regulatory risk, construction risk and the
risk that these projects may ultimately prove to be unprofitable. We might also be required to pay liquidated
damages for delays or face termination in the case of continued delay. In addition, new projects may pose
significant challenges to our management, administrative, financial and operational resources, as we
continue to expand across in India as well as venture overseas. We may be required to devote substantial
time and other resources in managing our new projects, potentially leading to neglect of our ongoing
projects. Further, we may face exposure to additional risks in our overseas projects, especially in
jurisdictions where we do not have experience. We cannot provide any assurance that we will succeed in
any new projects that we may enter into or that we will recover our investments in such projects. Any
failure in the development, management or operation of any of our projects may adversely affect our
business, financial condition and results of operations.
Delays or defaults in customer payments could result in reduction of our profits.
Because of the nature of our contracts, we sometimes commit resources to projects prior to receiving
advances, progress or other payments from the customer in amounts sufficient to cover expenditures as they
are incurred. Delays in customer payments or a client‘s inability to meet contractual payments obligations,
which are not unusual in the EPC and construction industry, may require us to make a working capital
investment. If a customer defaults in making payments on a project on which we have devoted significant
resources, it could have an adverse effect on our operating results. We are also currently engaged in certain
recovery matters.
The nature of our EPC and construction business exposes us to liability claims and contract disputes.
We are involved in large projects where design, construction or systems failures can result in substantial
injury or damage to third parties. We could face significant claims for damages in respect of, among other
things:
defects in the quality of our or our subcontractors‘ design, construction, engineering or planning;
latent defects;
accidents;
commercial and environmental matters;
our supply chain vendors‘ products; or
failure of our project management techniques.
Although we maintain insurance in respect of our projects in accordance with industry standards and we
selectively seek backup guarantees from our suppliers and sub-contractors, there can be no assurance that
such measures will be sufficient to cover liabilities resulting from claims. Any liability in excess of our
insurance payments, reserves or backup guarantees could result in additional costs, which would reduce our
profits. In addition, as we increase our own design capabilities, we will no longer have recourse to third
4