ABG Shipyard puts custom over staff dues

Company to divert majority of Rs 1,300 crore working capital loan towards executing orders

ABG Shipyard has said it will divert the bulk of a Rs 1,300 crore working capital loan for completing its pending orders. “The objective of (doing so) is that revenues should start coming,” Dhananjay Datar, CFO, told Business Standard.

The staffers are unlikely to cheer, as this is likely to mean a longer wait for their salary dues. “The assistant general managers and levels above have not received their salaries since January. Senior managers and levels below haven’t got theirs’ since April,” said a source.

ABG is the country’s largest ship building company in the private sector. This industry is still to recover from the economic slowdown-hit since 2008. Ahmedabad-based ABG is, as part of a debt restructuring package granted by its lenders, getting a Rs 650 crore infusion from them by the end of this month. This is part of a Rs 11,000-crore loan recast deal, worked out in March.

“Of the total (pending) order for 99 ships, about 42 ships have been prioritised (for execution) and so from this tranche (as mentioned earlier) of the working capital loan, about 13 new ships will be built, which includes naval orders and bulk carriers,” said Datar

Recently, it lost a Rs 580-crore order from state-owned Shipping Corporation of India. “I needed the vessels and the order was nowhere near completion,” said a senior official with SCI. “Hardly 20-30 per cent of the order was complete and the grace period was also crossed. We could not wait and, therefore, cancelled the order, which was for six vessels of $16 million each.”

“Though Shipping Corp has cancelled its order, we plan to go ahead to build these ships, as we do not see any dearth of buyers for these offshore supply ships in the market,” said Datar. “After we receive the first Rs 650 crore, we will have to complete some orders and only after that will we be given the next amount of Rs 650 crore working capital loan, making it a total of Rs 1,300 crore.”

In 2007, it had got a 12-ship order from Thailand’s Precious Shipping. It was unable to deliver and, eventually, the Thai company cancelled it.

“Overall, there are enough orders but everything is now linked to completion,” said Datar.

ABG is into making of small and mid-sized vessels and has a record of building 10-12 in a year. It is going to take a while for ABG to translate its order book into revenue. From the time of an order received to completion, a shipbuilder typically takes a minimum of 18 months to a maximum of 36 months, said analysts.