Gammon India in the limelight

Gammon India is in the limelight today morning. The stock breached the 20% upper circuit at Rs.15.49 and this is on the back of huge volumes of 10 lakh shares today alone, compared to two-week average volume of 68,000 shares.

This beleaguered company is in the news after it was known yesterday evening that a consortium of creditors to Gammon India has decided to convert part its Rs.15,000 crore debt into equity in a prelude to changing its management in a so-called strategic debt restructuring (SDR) exercise.

What this means is that banks will convert their debt into majority equity in the company and the objective would be to find a suitable buyer. Mere conversion of debt into equity will not help unless a new management comes in and makes some solid material changes.

Post the CDR, the company was carved into three units - power transmission and distribution (T&D), engineering, procurement and construction (EPC) and the third included all residual businesses. Last week, its Board decided to transfer its civil EPC business to its subsidiary Gammon Retail Infrastructure Pvt. Ltd in order to allow potential equity investors to invest in the civil EPC business.  Currently, T&D and EPC are in the process of being sold to strategic investors while the SDR has been invoked only in the residual business unit.