BQ:Lenders Put Up Reliance Naval For Sale Under Insolvency Process

1 June 2020: Lenders of Reliance Naval and Engineering Ltd., part of Anil Ambani’s Reliance Group, have sought expressions of interest from buyers for the sale of the private shipbuilder under the Insolvency and Bankruptcy Code.

The company is currently facing insolvency proceedings at the Ahmedabad bench of the National Company Law Tribunal.

The last date for submission of EoIs is June 27, while final list of prospective resolution applicants will be issued on July 17, according to an offer notice issued by the firm’s resolution professional.

Companies with a minimum net worth of Rs 600 crore and a consolidated group turnover of at least Rs 2,000 crore can bid for the company. The eligibility for financial institutions and private equity investors is Rs 1,000 crore of minimum assets under management.

The last date for submission of resolution plan for Reliance Naval is Aug. 6. The plan is expected to be submitted to NCLT Ahmedabad for approval on Sept. 5, the offer document said.

The company is being sold to recover outstanding loans of Rs 43,587 crore. Of this, the resolution professional has admitted Rs 10,878 crore of dues of financial creditors and another Rs 32,693 crore is under verification.

Operational creditors have claimed another Rs 1,922 crore from Reliance Naval, of which only Rs 485 crore has so far been admitted by the resolution professional, the offer document stated.

Severe Headwinds

Despite having a state-of-the-art facility at Pipavav, Gujarat, Reliance Naval was facing severe headwinds since 2013 due to a lack of orders from the defence ministry. The shipyard has been in a lot of stress leading to a significant reduction in operations as compared to its capacity.

According to an analyst, Reliance Naval’s bankruptcy process will have no impact on its promoter company Reliance Infrastructure Ltd. In its audited accounts for March 2019, the company had provided for its investment in Reliance Naval.

When contacted, a Reliance Naval spokesperson declined to comment.

As per an industry expert, finding a buyer for Reliance Naval will be tough as in the past, two private shipbuilders had failed to attract any buyer under the bankruptcy process.

In the absence of any buyer, ABG shipyard with a total debt of Rs 20,000 crore and Bharti Shipyard with its Rs 13,000 crore debt had to go for liquidation.

This low interest in private shipbuilders is due to lack of orders from the government, the expert said. Lack of orders also forced Larsen & Toubro Ltd. to merge L&T Shipbuilding, including Kattupalli Shipyard, with itself last year.

Source: BloombergQuint



Categories: India Bankruptcy

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