Mumbai: Religare Finvest Ltd, a subsidiary of Religare Enterprises Ltd, has acquired 1.32 million pledged shares of India’s largest private shipbuilder ABG Shipyard Ltd to take a 24.49% stake in the debt-laden company.

In its filing to BSE, ABG Shipyard said Religare Finvest has acquired 1.32 million shares, representing 24.49% stake in the shipbuilder, by invoking the ‘encumbrance’ clause.

This acquisition will, under the rules, not trigger an open offer to ABG Shipyard’s public shareholders.

An open offer is required to be made if an acquirer buys at least a 25% stake in a target company or if a significant change in management control accompanies a stake purchase below the threshold.

The total standalone debt of ABG Shipyard as of March 2016 was at 8,741.59 crore.

Since March 2014, ABG Shipyard has been in the middle of a corporate debt restructuring (CDR) exercise, under which lenders led by State Bank of India agreed to recast 11,000 crore of loans, offered the firm a two-year hold on interest payment, reduced borrowing cost and extended the repayment period.

The firm was hurt by a slump in the industry as freight rates fell in step with a decline in global trade, combined with a domestic economic downturn.

ABG Shipyard’s executive director Dhananjay L. Datar, while confirming that the company had pledged shares with Religare Finvest, said he was not aware of their acquisition via encumbrance.

Religare Finvest is a small and medium enterprise (SME)-focused non-banking financial company or NBFC. The company also runs a retail capital markets financing business which includes loans against marketable securities.

On 9 March, Mint had reported that the lending consortium was in discussions with a Vietnamese financial investor to sell a majority stake in ABG, after it invoked the strategic debt restructuring (SDR) provision in December.

Lenders to the shipbuilder also decided to issue a public notice inviting expressions of interest (EOI) from buyers keen to pick up a controlling stake in the company.

On 12 June 2015, ABG informed stock exchanges that it received an EOI from Germany-based Privinvest Holding, which owned shipyards in Germany, Greece and the United Arab Emirates. However, the deal fell through.

ABG’s CDR was one of the largest loan recasts undertaken in recent years by Indian banks, second only to the 13,500 crore debt reorganization for engineering and construction firm Gammon India in July 2013. Lenders to Gammon India invoked the SDR provision in November.

According to SDR norms issued by the Reserve Bank of India (RBI) in June 2015, banks can convert a part of a defaulting firm’s debt into majority equity and assume operational control. They will then have 18 months to find a buyer for at least 26% of this equity.

Since the SDR rules were introduced, lenders have converted debt to equity in a number of firms, including Electrosteel Steels, Ankit Metal and Power Ltd, Rohit Ferro-Tech Ltd, IVRCL Ltd, Gammon India, Monnet Ispat and Energy Ltd, VISA Steel Ltd, Lanco Teesta Hydro Power Pvt. Ltd, Jyoti Structures Ltd and Alok Industries Ltd.

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