Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

IDBI Bank moves NCLT against Reliance Naval’s ₹1,250 crore loan default

Reliance Naval and Engineering was declared an NPA in February after RBI introduced a framework for stressed asset resolution

Mumbai: IDBI Bank Ltd has approached the dedicated bankruptcy court against Reliance Naval and Engineering Ltd for defaulting on loans totaling more than 1,250 crore.

Reliance Naval, part of Anil Ambani-controlled Reliance Group, is a private shipbuilder with licence and contracts to build warships.

The state-run bank has approached the Ahmedabad bench of the National Company Law Tribunal (NCLT) against Reliance Naval to initiate a resolution process against the company.

Reliance Naval owes a total of 5,349.17 crore to its lenders as on March 2018.

“As per the valuation report of March 2018, the company’s net market value stood at 1,880 crore while its fair market value by another valuer was around 1,535 crore as on 21 May 2018," IDBI said in its petition.

Nishit Dhruva, managing partner of law firm MDP and Partners, who is representing IDBI Bank, confirmed the filing of the petition but declined to elaborate.

IDBI Bank and Reliance Naval did not respond to emails seeking comment.

According to the petition, Reliance Naval is facing financial stress due to a downtrend in commercial shipbuilding sector, cancellation of contracts and cost overrun of dry dock-2 project under construction.

Reliance Naval, which is controlled by Reliance Infrastructure Ltd, was previously known as Reliance Defence and Engineering Ltd.

On 4 March 2015, Reliance Defence Systems, a unit of Reliance Infrastructure Ltd, acquired Pipavav Defence—then the country’s largest shipyard with a licence to build warships—and rechristened it.

A group of lenders led by IDBI Bank has been trying to restructure debt on the books of Reliance Naval ever since it acquired debt-laden Pipavav Defence and Offshore Engineering, which was undergoing restructuring under the corporate debt restructuring (CDR) scheme.

In 2017, the lenders gave their nod to Reliance Naval’s CDR exit plan with a longer maturity period for loans of about 6,800 crore. It even gave its go-ahead for implementing a refinancing scheme.

The company was however declared a non-performing asset in February this year after the Reserve Bank of India introduced a framework for stressed asset resolution.

Reliance Naval was also in discussions with lenders for a one-time settlement but lack of a resolution led the lenders to proceed with insolvency proceedings.

Reliance Naval’s consolidated loss almost doubled in the last financial year to 1,011.97 crore from 577.22 crore in the previous year. Net sales fell 33% to 378.48 crore at the end of March 2018.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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