gayatri projects limited - Edelweiss

GAYATRI PROJECTS LIMITEDWe have executed work on behalf of our joint venture viz. IJM-Gayatri where our share of profit / loss is40% and IJM’s share is 60%. In 6 projects where we have executed work from March, 1999 till March,2006 on behalf of IJM-Gayatri, we have incurred excess of expenditure over income for an amount of Rs.13414 lakhs. We have raised a debit note on IJM-Gayatri Joint Venture for this amount. IJM-Gayatri JV haslodged various claims with NHAI (client of IJM-Gayatri) amounting to more than Rs. 37500 lakhs includingthe above claims. In view of the claims pending with NHAI, we have not made provisions for our share of40% in our books. If the entire claims lodged with NHAI by IJM-Gayatri JV are not realized, we may haveto provide for loss of Rs. 5365.60 lakhs (i.e. 40% of Rs. 13414 lakhs) in our books, being our 40% sharein the JV and in turn our profitability and networth will be reduced by Rs. 5365.60 lakhs.At present IJM-Gayatri has various outstanding claims lodged with its various clients amounting to Rs.37556.39 lakhs, out of which claims amounting to Rs. 8180.57 lakhs are pending with their clients forsettlement, claims amounting to Rs. 5852.09 lakhs are pending with Dispute Review Board, Rs. 8749.72lakhs are pending for arbitration and Rs. 14774.01 lakhs are pending at High Court, Delhi. Recently, claimamounting to Rs. 14774.01 lakhs was rejected by arbitration tribunal and the case was filed with High Court,Delhi. In the past IJM-Gayatri has not received any pending claim from its client. For details, please referto section “Outstanding Litigations and Material Development”.15. We have entered into transactions with related parties amounting to Rs. 24943.06 lakhs as on March31, 2006.We have entered into various transactions with related parties, including the several Promoter group companies.For detailed information on our related party transactions, refer section “Related Party Transactions” beginningon page 116 of this Prospectus.16. Sustained high material or fuel cost may adversely affect our operation.Our construction operations require various bulk construction material including cement, steel, bitumen. Inaddition we are required to procure various equipment including process equipment, construction equipment,mechanical equipment etc. Our ability to pass on the increase in the equipment and material cost may belimited with limited price variation condition. Further any unanticipated increase in the equipment, materialand fuel cost not taken into account in our bid, may adversely affect our operations and financial position.17. We face significant competition in our business from Indian and international engineering constructioncompanies.The Indian infrastructure industry is competitive. Majority of our contracts are obtained through a competitivebidding process. In selecting contractors for major projects, clients generally limit the tender to contractorsthey have pre-qualified based on several criteria including experience, technological capacity and performance,reputation for quality, safety record, financial strength and size of previous contracts in similar projects,although price competitiveness of the bid is the most important selection criterion. Our competition variesdepending upon the size, nature and the complexity of the project. In the past the prices have been underimmense pressure. Further, we are currently qualified to bid for projects upto a certain value and thereforemay not be able to compete for larger projects. Our ability to bid for and win major projects is dependent onour ability to show experience of working on any large projects and develop execution capabilities andcredentials to execute technically complex projects. Any inability to qualify for and win large constructionprojects and the risks associated with the execution of such contracts could adversely affect our marginsand results of our operations.18. We will be executing the first BOT projects in our Company. Our company does not have any priorexperience in execution of BOT projects.Our Company has not undertaken any BOT / BOOT projects earlier on its own. Any inability to execute orx