MUMBAI: Loss-making construction firm Gammon India is in talks with its lenders to recast its debt aggregating to Rs 3,500 crore through the corporate debt restructuring (CDR) route, according to two informed sources.
The cash-strapped company hopes to get a breather from banks on debt repayment and is simultaneously planning to raise funds by diluting its stake in its subsidiaries to improve its cash position at a time when a slowdown in projects has hurt revenue. Corporate debt restructuring features a forum for lenders to ease terms of repayment for companies in financial trouble. A request for a loan recast under CDR is approved provided the initiative to resolve the case under this system is taken by at least 75% of the creditors by value and 60% by number.
When the company's comments were sought, a top Gammon official told ETthat it was too early to offer comments on this issue. Several highly-leveraged infrastructure companies, which are in capital-intensive businesses, have been working on restructuring their debt as servicing interest at a time when revenues have moderated has become tough for them.
Large firms, which have recently received the CDR cell's approval for debt recast includes GTL, Suzlon Energy, HCC and Jindal Stainless.
The 100-year old Gammon India has been struggling as it is for cash as a slowdown in projects in the local market has hurt its revenues. Its European subsidiaries are reporting losses even as costs continue to be high. The company has a debtto-equity ratio of 2:1. Gammon India has to service a debt of close to Rs 3,500 crore, while its listed subsidiary Gammon Infrastructure Projects has a debt burden of an additional Rs 4,000 crore. Gammon India's lenders include Canara Bank, Allahabad Bank andICICI Bank.
The company has accumulated losses of Rs 321 crore in the nine months ended December, against a profit of Rs 35 crore ayear ago. Its revenue declined 3% year-on-year to Rs 3,565 crore in the first nine months of 2012-13. Gammon is simultaneously working on divesting stake in subsidiaries to reduce its leverage and improve its cash positions.
On March 3, ET had reported that Gammon India had initiated talks with investors to sell up to 24% stake in its listed subsidiary Gammon Infrastructure Projects and other subsidiaries to raise up to Rs 1,000 crore. Parvez Umrigar, group director, had told ET earlier, "Gammon India's order backlog is around Rs 16,000 crore, almost three times the turnover. We have orders but the challenge is to execute them.