GAMMON INDIA LIMITED

The tax benefits that our Infrastructure Development Businesses enjoy under the provisions of the
Income Tax Act may not continue indefinitely.
Because of the nature of our business, certain projects being developed by our Infrastructure Development
Business enjoy tax benefits under the Indian Income Tax Act, including:
a deduction equal to 100.00% of the profit from certain projects that we are developing for a period
of 10 consecutive assessment years subject to MAT; and
profits derived from certain types of housing projects approved before March 31, 2007 are not
taxable.
Some of these benefits are available only for a specified period of time and others are available only in
respect of specific projects. As and when the specified period of time expires or specified projects are
completed, our tax liabilities may increase, reducing our profitability. Further, there can be no assurance
that the Government would not amend these provisions to our detriment, or that after the expiry of the
specified period of time, the Government would extend these tax benefits or that it would not enact laws in
the future that would adversely impact our tax incentives and, consequently, our tax liabilities and our
profits.
We currently enjoy certain tax benefits, and any change in tax policies applicable to us may affect our
results of operations.
Currently, infrastructure development projects enjoy certain benefits under Section 80IA of the Income Tax
Act, 1961. As a result of these incentives, most of our projects are subject to relatively low tax liabilities.
Our income tax exemptions for various projects expire at various points of time. There is no assurance that
the infrastructure projects will continue to enjoy the tax benefits under Section 80IA in future. When our tax
incentives expire or are terminated, our tax expenses will increase significantly, thereby reducing our
profitability. Further, the Government may enact laws in the future that could adversely impact our tax
incentives and consequently, our tax liabilities and profits.
We face margin pressure as a large number of infrastructure-related contracts are awarded by the
Government and State Governments following competitive bidding processes.
Most of the infrastructure development contracts are awarded by the Government, state Governments or
their respective authorized agencies through competitive bidding processes and satisfaction of other
prescribed pre-qualification criteria. Once the prospective bidders clear the technical requirements of the
tender, the contract is usually awarded to the most financially competitive bidder. We face competition
from domestic and international companies, some of whom may operate on a larger scale than us and thus
may be able to achieve better economies of scale than us. The nature of the bidding process may cause us
and our competitors to accept lower margins in order to be awarded the contract, which may have an
adverse effect on our business, financial condition and results of operations.
The multiple role of certain Government entities as our regulator, customer, joint venture partner and
direct or indirect competitor may give rise to conflicts of interest that may harm us.
We have entered into agreements with Government entities, including NHAI, GCDA, PSEB, PPT, MbPT
and the Board of Trustees of VPT, in various capacities. At the same time, some of these Government
entities are also the counterparties in contracts entered into with our competitors, or in some cases, carry on
activities that compete with our business. Further, in some other cases, Government entities are our
competitors. We may face or suffer potential conflicts of interest, which may arise from the fact that such
Government authorities play multiple roles in our business model. We cannot assure you that potential
conflict of interest situations will not continue to arise in the future or that any disputes arising in relation
thereto will be resolved in a manner favorable to us. Any such situation may have an adverse effect on our
business, financial condition and results of operations.
The risks associated with BOT and BOOT projects could adversely affect our financial results.
As governmental and regulatory authorities seek greater private sector participation, we expect our exposure
to BOT and BOOT projects, particularly in the area of transportation and hydroelectric power, to increase.
Road projects are either toll based or annuity based. In the case of toll projects, the toll revenue is a function
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