Scripscan:Gammon India Ltd
cmp:58
Code:509550
Story:Bogged down by debt, cost overruns in a few fixed-price projects and muted subsidiary performance, infrastructure major Gammon India has had a trying time. The deteriorating performance and cloudy future sparked a steep fall in its stock price. Adding to trouble was the general mark-down of all construction and infrastructure stocks.After managing to significantly improve performance in 2010-11, Gammon's Italian subsidiaries failed to build on promise. While the collective order book position was comfortable, execution slowed due to working capital constraints. The muggy near-term picture for Gammon's overseas ventures weighed on the stock.On the domestic front, the company's move into real estate required heavy investments which are yet to pay off. Compounding woes, order inflow during the year was slow, though this was the case with most infrastructure companies. The outstanding order book stood at around Rs 14,500 crore at end-September 2011, down from the Rs 15,600 crore at the start of the fiscal.Revenues over the past several quarters have either been flat or have declined. For the six months ended September 2011, revenues were up just 0.2 per cent. With debt-equity shooting up to 1.5 times from one at end-March 2011 and a rising interest rate regime, interest costs rose 36 per cent for the first half of this fiscal. This, coupled with flat revenues, led to a 34 per cent fall in net profits.
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