Have Lenders Put ABG Shipyard On The Block?  

SBI Capital Market and PriceWaterhouseCoopers (PwC) on Monday invited expressions of interest (EoI) for a majority stake or assets of a listed shipbuilding company by March 6. The company in question, according to a person familiar with the transaction, is ABG Shipyard Ltd., the country’s largest private sector shipbuilder which owns and operates shipyards at Dahej and Surat in Gujarat.

An EoI is not a binding agreement or bid, which means that lenders do not necessarily have to auction the controlling stake to those who have shown interest. Once the EoI is in, the consortium would reach out to a suitable buyer and request a bid.

The invitation was mandated by a consortium of lenders, the person added.

ABG Shipyard has been under corporate debt restructuring since March 2014, when a group of lenders, including State Bank of India, Bank of Baroda, Punjab National Bank, Central Bank, Dena Bank, Yes Bank and ICICI Bank, agreed to recast the company’s loans.

A comment from ABG Shipyard was still awaited at the time of publishing this report. An email query sent to ICICI Bank did not elicit a response.

ABG Shipyard was hurt by a slump in the industry as freight rates fell in step with a decline in global trade, combined with a domestic economic slump.

In September 2016, the company had sought shareholder approval for allowing lenders to convert up to Rs 16,397-crore of debt in exchange for more than 51 percent stake in the company under the Reserve Bank of India’s strategic debt restructuring (SDR) mechanism. The proposal was rejected, the company had said in a stock exchange filing.

The company is in talks with “various parties which may be prospective investors”, it said in a recent clarification to bourses after reports that Reliance Defence and Engineering Ltd, Shapoorji Pallonji Group and Liberty House Group of U.K. had shown interest in buying the debt-ridden ABG Shipyard. However, the company maintained that these discussions were in their preliminary stages, and it had entered into non-disclosure agreements with some of them.

In another clarification issued to the exchanges in response to a report indicating it was in talks with a Russian firm, the company said it had appointed Rothschild as an investment banker to explore the possibility of a stake sale but did not offer any further details.

Shareholding Pattern

As of quarter ended December 31, 2016, promoters held 9.74 percent in the company, while public shareholders owned the remaining 90.26 percent. Institutional shareholding alone constituted 57 percent of the public shareholding and 52 percent of the total shareholding. Forty-seven percent of the company’s total shareholding was with banks and financial institutions, which held more than 1 percent stake each as on December 31, 2016.

Widening Losses

ABG Shipyard's revenue declined to Rs 35 crore in the financial year (FY) 2015-16 from Rs 2,100 crore in FY13. Net loss rose from Rs 151 crore in FY14 to Rs 2,660 crore in FY16.

Debt Position

As of September 2016, the company’s debt stood at approximately Rs 16,400 crore, according to the company’s filings. The standalone net debt stood at Rs 9,236.63 crore as of FY16, according to data available with Bloomberg.