GAMMON INDIA LIMITED

of actual traffic volume. Adverse deviations between actual traffic volumes and our estimates, delays in
completion of related project components or failure to achieve financial closure for the relevant project
could result in significant loss of revenue in toll collection. Our revenues would also be affected by the
unforeseen management and maintenance costs that we are required to incur while operating our projects. In
addition, the Government‘s model concession agreement limits and regulates increases in toll charges and
as a result we may not increase our toll charges to cover increases in costs. In hydropower projects, in
which the plant is operated for the concession period, we may also suffer significant loss of revenue if the
project does not meet performance requirements. Further, we could face substantial losses if we
inaccurately forecast the returns from BOT and BOOT projects.
BOT and BOOT projects require significant initial capital investments with potential returns spread over a
longer period of time. This requires us to commit significant amounts of capital for a period with a limited
return in the short term and may adversely affect our liquidity and financial resources.
Delays in the acquisition of private land and/ or eviction of encroachments from Government-owned
land by the Government or state Government may adversely affect the timely performance by our SPVs
of their obligations under concession agreements or implementation agreements leading to disputes with
the Government or state Government.
For some of our projects under development or in the pre-development phase, the Government or state
Governments are required under the relevant concession agreements or implementation agreements to
facilitate the acquisition or lease of, or secure rights of way over, tracts of private land and/ or to hand over
unencumbered Government land free of encroachments. Delays by Government to acquire or lease or
secure rights of way over such private land or in eviction of encroachments on Government land may delay
project implementation prescribed by the relevant concession agreement or the implementation agreement
and cause consequent construction delays. This may lead to disputes and cross-claims for liquidated
damages between our project SPVs and the Government.
The completion and commercial operation dates of some of our projects are expected to be delayed due to
delays in the acquisition or securing of project land. Even if we are not penalized for such delays, delays in
the acquisition of the land may lead to payment delays or disputes with the Government in connection with
a completed project‘s eligibility for an early completion bonus. Such delays may have an adverse effect on
our revenues, business, financial condition and results of operations.
The private infrastructure development industry is subject to the Government’s programs and policies.
The development of India‘s infrastructure will be dependent on programs and policies that facilitate and
encourage private sector investment in infrastructure. Many of these programs and policies are evolving and
their success will depend on whether they are designed to address the issues properly and are implemented
effectively. Additionally, we believe that these programs will need continued support from stable and
experienced regulatory regimes that not only stimulate and encourage the continued movement of private
capital into infrastructure development, but also lead to increased competition, appropriate allocation of
risk, transparency, effective dispute resolution and more efficient and cost-effective services to the end
consumer.
We believe that the availability of private capital and the continued growth of the infrastructure
development industry is also linked to continued growth of the Indian economy, consumers‘ income levels
and the extent to which they would be willing to pay for infrastructure services. If the central and state
governments‘ initiatives and regulations in the infrastructure industry do not proceed in the desired direction
or if there is a downturn in the macroeconomic environment in India, our business, our financial
performance and the price of our Equity Shares could be adversely affected.
Risks Related to Our International Business
Our recently acquired overseas entities may not be profit-making in the near future.
We evaluate merger and acquisition opportunities as part of our growth strategy and may commit ourselves
to mergers or acquisitions in the future, if suitable opportunities arise. These may require significant
investments which may not result in favorable returns in the near future. Our Company paid €50.00 million
for a 50.00% stake in Sofinter in August 2008 and €40.00 million for a 75.10% stake in FTM in June 2008.
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