Bangalore: Embattled offshore oilfield services firm Great Offshore Ltd has run into fresh trouble after Axis Bank Ltd walked out of a deal to lend Rs350 crore to the Mumbai-based firm for funding the purchase of an oil drilling rig, currently under construction at Bharati Shipyard Ltd.

The rig, the first to be built at an Indian shipyard, costing $168 million (Rs804.72 crore), was due for completion in April, in time to start work from 15 May on a five-year contract with state-run explorer Oil and Natural Gas Corp. Ltd (ONGC) at a day rate of $146,000.

Complications galore: A file photo of a Bharati Shipyard facility at Dabhol, Maharashtra.

Axis Bank wanted the money back after ONGC cancelled the rig contract and also due to delay in completing the construction of the rig. Great Offshore returned the Rs350 crore taken from Axis Bank a few days ago.

Rajat Dutta, spokesperson for Great Offshore, confirmed the development, but declined to elaborate. Axis Bank declined to comment.

Meanwhile, the French corporate and investment bank, Natixis SA, which had lent another Rs150 crore to construct the rig, has been given another asset of Great Offshore as security for its loan. As a result, the rig under construction at Bharati Shipyard is a totally unencumbered asset.

Great Offshore says finance was not a problem and that it will fund the rig purchase from its own internal resources. The rig is now expected to be completed by March 2010, according to Great Offshore.

Some industry experts say that the rig construction could be delayed till at least December 2010.

“Axis Bank must have felt jittery because of the risk involved in the construction of the rig and also because the rig does not have a firm employment nor is it seen to be getting employment in the near future," said Navindar M., analyst at Mumbai-based brokerage Natverlal and Sons Stockbrokers Pvt. Ltd.

ABG Shipyard Ltd and Bharati Shipyard Ltd, India’s top two shipbuilders outside state-control, are battling each other to grab Great Offshore, which fell out of the hands of Vijay Kantilal Sheth, its former promoter, in May this year. This happened because of the shares he had pledged for loans, making him the first promoter in India’s corporate history to face such a situation.

Both the shipbuilders are currently awaiting permission from the stock market regulator, the Securities and Exchange Board of India (Sebi), to launch their respective open offers to buy an additional 20% of the shares held by the public in the firm, according to Indian take over laws.

Bharati Shipyard is constructing an oil drilling rig and a support vessel for Great Offshore, together worth around $220 million. It was mainly to protect these orders that the promoters of Bharati Shipyard—P.C. Kapoor and Vijay Kumar—lent money to Vijay Sheth in early January to bail him out of a personal financial crisis.

Sheth then pledged his shares with the promoters of Bharati Shipyard for a Rs240 crore loan. But when he failed to repay the loan, the promoters of Bharati invoked the pledge and acquired the 14.89% stake Sheth had pledged with them.

Bharati then announced a public offer for buying an additional 20% from the public. ABG Shipyard, promoted by Rishi Agarwal, also entered the take over battle a few days later. Ahead of the open offers, both the firms have raised their respective stakes in Great Offshore through share purchases from the open market.

Bharati now has a 22.48% stake in Great Offshore while ABG holds 7.87%.