Lenders led by IDBI Bank have turned down a resolution plan proposed by Reliance Naval & Engineering, which has not been servicing its more than Rs 9,000 crore of debt for several months now.
The lenders will now initiate bankruptcy proceedings against the company of the Anil Ambani-led RelianceNSE -0.89 % Group, said a bank executive involved in the matter. Lenders rejected the proposal for want of viability. With no proposal for an upfront equity investment or repayment of a part of the loan in default, lenders believe the firm is beyond resolution and liquidation may be the only option, the bank executive said.
“The RBI deadline to firm up a resolution plan for stressed companies has ended in early July and the proposal forwarded by Reliance Naval was not acceptable to lenders,” said the executive. “Reliance Naval was unwilling to make upfront payment and wanted banks to convert debt into equity as part of the resolution.”
Reliance Naval did not respond until press time Wednesday to an email seeking comment. Under a June 7 Reserve Bank of India circular, lenders had 30 days to resolve around 70 loan accounts, each amounting to more than Rs 2,000 crore and totalling about Rs 3.8 lakh crore. Else, they must refer these to the National Company Law Tribunal for bankruptcy proceedings.
Reliance Naval, earlier known as Pipavav Defence & Offshore Engineering, has been facing severe financial stress since 2013, when it was under the management control of SKIL Group. Even after a restructuring of its debt in March 2015, its accounts with lenders continued to be in the Special Mention Account II category, or loans that are 60 days past the due date.
The Reliance Group took over the management control in January 2016. After the acquisition, the Reliance Group provided financial support to the company and made substantial investment till January 2018. Much of the money had been used towards payment to lenders.
IDBI Bank filed an application last year to initiate insolvency and bankruptcy proceedings against the company. While finalising its audited accounts for March 2019, Reliance Infrastructure had provided for its investment in Reliance Naval.
Reliance Naval had reported a net loss of Rs 9,399 crore for the year through March 2019, compared with Rs 406 crore in the previous year.
Source: Economic Times