IDBI Bank to file insolvency case against Reliance Naval with NCLT

R-Naval’s annual report for 2016-17 says it had overdue loans of ~3.432 bn towards principal and interest payments
IDBI Bank will file insolvency applications against Reliance Naval and Engineering (R-Naval) with the National Company Law Tribunal (NCLT) Bench in Ahmedabad in the next few days.

This is a sequel to the Reserve Bank of India’s 180-day general deadline to resolve around 70 large stressed corporate accounts having ended this Monday, said two  sources. 

A senior banking executive told Business Standard that IDBI had instructed its lawyers to file the applications under the Insolvency and Bankruptcy Code; this would happen over the next few days. 

According to a report from Brickwork Ratings, R-Naval owes lenders close to Rs 90.4 billion, with IDBI having the most exposure. The report says R-Naval had “not provided the required information for a review of the rating, despite close follow-up; hence, the said rating is not reviewed”. The rating was due for annual review in April 2016. 

According to R-Naval’s annual report for 2016-17, it had overdue loans of Rs 3.432 billion toward principal and interest payments. Further, it had defaulted in repayment of loans to 18 banks and financial instit utions, totalling Rs 1.95 billion. 

At a press conference on Wednesday, Reliance Infrastructure chairman Anil Ambani, told journalists they had placed a resolution plan for R-Naval with the lenders. It was for the latter to decide the way forward. 

Last November, IFCI, another government-owned lender, filed a bankruptcy petition with the NCLT in Ahmedabad on the non-payment of a loan given to R-Naval’s subsidiary, Reliance Marine and Offshore. The bench disposed the matter on February 19. 

Pathak HD and Associates, the auditor, stated in R-Naval’s annual report that there were doubts about the company’s ability to continue as a “going concern”. It was facing cash losses and erosion of network, with secured lenders recalling loans. The current liabilities were substantially higher than the assets.  

In March 2015, the Anil Ambani-led Reliance Defence and Engineering took over Pipavav Shipyard and Pipavav Defence & Offshore Engineering Company for Rs 21 billion. Pipavav Shipyard was a shipbuilding corporation that had contracts with the Indian Navy to build warships and other vessels. Reliance Defence and Engineering changed its name in 2017 to R-Naval.

As a result of the acquisition, R-Naval was made responsible to fulfill these supply contracts for ships to the navy. Last year, it signed a Master Ship Repair Agreement with the US navy, to maintain vessels of the latter’s 7th Fleet, operating in this region. 

In June this year, around $30 million (Rs 2.1 billion) worth of orders from Bharat Electronics could not be honoured by the company. And, earlier this month, Oil and Natural Gas Corporation (ONGC) terminated a contract for supply of five offshore support vessels, of 12 it had earlier ordered. R-Naval is suing ONGC at the Bombay High Court, stating it wants to fulfil the contract and deliver all 12 vessels. 

In a filing with the BSE exchange last Saturday, Anil Ambani, still chairman of R-Naval, stated he had officially resigned as a director on its board with immediate effect. Prior to that on  August 10, three directors of the company, including one from the military services, resigned as directors. 

The company said Ambani had resigned in “compliance with provisions of Section 165 of the Companies Act, prescribing the limit on directorships to only 10 public companies”.

As of the quarter ended June 2018, the company’s net loss was Rs 3.47 billion. Earnings per share had fallen from a negative Rs 3.13 for the quarter ended June 2017 to a negative  Rs 4.71 for the corresponding period. 

In 2017-18, the net loss stood at nearly Rs 9.6 billion, as compared to one of a little over Rs 5.2 billion in 2016-17. R-Naval’s stock price closed on Wednesday at Rs 15.38 on the BSE, up 5 per cent from Tuesday’s close.

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