GAMMON INDIA LIMITED

and components are fluctuating based on commodity prices. The costs of components sourced from outside
manufacturers may also fluctuate based on their availability from suppliers. However, most of projects‘
contracts contain an escalation clause with the client for the variation in price and to that extent our
commodity price risk is mitigated.
Credit Risk
Our clients which pays us a fixed annuity at pre-determined intervals may default on their payment
obligations to us. This could have an adverse effect on our results of operations.
Exchange Risk
We face exchange rate risk to the extent that our expenses and debt repayments are denominated in
currencies other than Indian rupees. Please refer to note B-19 to our audited consolidated financial
statements for details on our exchange risk.
Interest Rate Risk
Our financial results are subject to changes in interest rates, which may affect our debt service obligations
and our access to funds. As of March 31, 2009, an outstanding amount of Rs.15,986.48 million, or
approximately 36.94% of the our consolidated borrowings (including subordinated debt) was on a floating
rate basis and linked to BPLR. In addition, as of March 31, 2009, an outstanding amount of Rs.13,360.34
million, or approximately 30.87% of our consolidated borrowings (including subordinated debt), carried
interest at fixed rates with the provision for periodic reset (every once in two or three years) of interest rates.
Our floating rate loans are dependent upon the RBI policy, market conditions and liquidity position in the
system. Any increase in BPLR could increase our interest costs on these loans.
Inflation Risk
Although India has experienced significant inflation in recent years, this has not had any material impact on
our business and results of operations. The Government has initiated several economic measures to curb the
rise in inflation rates, but it is unclear at this stage whether these measures will have the desired effect. This
rise in inflation rates in recent years may adversely affect growth in the Indian economy and our results of
operations.
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