R-naval debt resolution gets delayed yet again

Bid submission date extended for fifth time

Even as Naveen Jindal-owned JSPL group has joined the race to buy Anil Ambani’s bankrupt shipyard, Reliance Naval and Engineering, the National Company Law Tribunal has granted five more months to the lenders to complete the resolution process. The company has defaulted on loans worth ~11,000 crore.

Even as Naveen Jindal-owned JSPL group has joined the race to buy Anil Ambani’s bankrupt shipyard, Reliance Naval and Engineering, the National Company Law Tribunal (NCLT) has granted five more months to the lenders to complete the resolution process.

The company has defaulted to loans worth ~11,000 crore.

Apart from Jindal, the other serious contenders are Russian governmentowned United Shipbuilding Corporation and Us-based fund Interups.

The Ahmedabad Bench of NCLT has granted an extension of 153 days for the completion of the resolution process of R-naval to August this year. With this, the resolution professional has sought bids submission date for the fifth time to March 15.

The debt resolution was delayed mainly due to lukewarm response from the bidders due to the Covid-19 pandemic.

Both Jindal and Russian government have completed the inspection of the shipyard during the last week of February and a five-member team of the Russian government concluded its inspection of the yard this week.

Pipavav shipyard had earlier received interests from Chowgule Industries of Goa and APM Terminals Company as well as Invent ARC, among others, but all the three of these potential bidders have set terms unacceptable to the banks.

There are also legal hurdles to the resolution plan. The shipyard is located on the leased land in Pipavav, Gujarat, wherein the sea-facing port site is taken on lease from Gujarat Maritime Board, and the SEZ site is taken on lease from Ecomplex, a wholly owned subsidiary of Reliance Naval.

R-naval has already received lease termination notices for the land taken on lease from Gujarat Maritime Board, whereas E-complex is also undergoing a resolution process through NCLT. With this, the site at the shipyard is under legal dispute and whether the potential buyers will be able to use the shipyard post takeover is not clear.

Taking this into account, the potential bidders have sought assurances from the Ministry of Defence and the Indian Navy and Coastguard that fresh orders should be given to the new buyer to pay for their risk and investment. But the Indian government is not ready to offer assurance to any bidder, including to the Russian government, saying the yard would have to follow established rules to competitively bid for the potential shipbuilding orders. L&T is another big player in the Indian ship building sector.

Two other private shipyards, ABG Shipyard and Bharati Shipyard (BSL) have also failed to find buyers for the past four years as the Ministry of Defence is unwilling to take the risk of giving ship orders to private yards as these went bankrupt and were unable to service orders. The government-owned shipyards are performing well in the same segment.