Three shipyards account for bulk of Rs 44,000 cr banks lost to the industry

ABG Shipyard was biggest contributor, at Rs 23,000 cr, to the drain on banks' coffers

Indian banks have lost around Rs 44,000 crore in the Indian shipyard industry with three large companies, and ABG Shipyard accounted for most of those losses.

Bankers said while their exposure to ABG Shipyard was Rs 23,000 crore, the banks have lost around Rs 12,500 crore in Reliance Naval & Engineering, earlier known as Pipavav Shipyard, and another Rs 8,500 crore in Bharati Shipyard

“Despite a series of debt restructurings, these companies failed to return back to profitability. Later, the banks took several steps to recover the loans, including enforcing the Insolvency and Bankruptcy Code, but it did not help recover the dues,” said a banking source.

While ABG Shipyard was sent for liquidation, the sale process of Reliance Naval & Engineering is still on with Mumbai-based Hazel Mercantile leading the race. In 2019, a public notice was issued for liquidation of Bharati Shipyard. Banks are not expecting much recovery from Reliance Naval Defence, which has received two bids so far, including from a promoter entity of Jindal Steel.

“The private shipyard industry had several issues, including not getting adequate orders from the government/Indian Navy, Coast Guard, and ONGC, which needs offshore supply vehicles. Many of these companies expanded capacity, increased orders from the government and as the orders did not materialise, the bank loans became non-performing assets (NPAs),” said another source from the shipyard industry. Other factors that exacerbated the problem were the economic downturn, decline in global trade, and liquidity crunch, which hit the performance of the private shipyards. The execution of existing order books of the private sector remains uncertain because of these unresolved issues, with customers cancelling orders, and choosing public sector undertakings instead.

The shipyard sector saw so much demand that several companies, including the Munjals, Mahindra, and Anil Ambani bid for Pipavav Shipyard, but Ambani finally won the race, 

the source said, asking not to be quoted.

The industry is dominated by government-owned shipyards, which get the lion’s share of orders from the Indian defence sector.

In the ABG Shipyard case, the Central Bureau of Investigation and the Enforcement Directorate are investigating allegations of fraud and siphoning-off of funds from the company. Lenders said the account was classified a fraud after a forensic audit revealed that the promoters had allegedly diverted funds