Reliance Naval and Engineering's dry dock. (Source: Company website)

IDBI Bank Drags Reliance Naval To NCLT For Insolvency Resolution

IDBI Bank Ltd. has moved the National Company Law Tribunal against Reliance Naval and Engineering Ltd. seeking debt resolution under the Insolvency and Bankruptcy Code.

The state-run lender filed an appeal with the Ahmedabad bench of the NCLT to seek debt arbitration against the shipbuilder, according to a stock exchange filing. A similar application was filed by another lender, IFCI Ltd., in November, which is pending admission.

The company’s debt stood at Rs 5,300 crore as of March, according to filings. Bankers, however, say that total dues are at about Rs 9,000 crore including principal and interest.

IDBI Bank has chosen EY as the interim resolution professional for Reliance Naval's insolvency process, a person close to the development told BloombergQuint.

Reliance Naval had offered a one-time settlement scheme to lenders as part of a resolution plan to be cleared before Aug. 27, according to a banker who is part of the 18-member lending consortium. However, it still awaits the lenders’ nod since the company sought a deep haircut. While lenders didn’t approve the plan, they have kept the proceedings on hold, hoping for a better offer from the promoters.

If a deal is arrived at before the bidding process under the Insolvency and Bankruptcy Code begins, lenders have the power to withdraw from the insolvency proceedings, as per a recent amendment to the code.

Reliance Naval, which was previously known as Gujarat Pipavav, was purchased by the Anil Ambani Group under the corporate debt restructuring scheme in 2015. At the time, the debt of the company was a notch lower at Rs 7,500 crore, the banker quoted earlier said.

The shipbuilder, one of the two private players in India, has been facing a crunch. A global downturn in the shipbuilding industry and a delay in defence orders has hurt the company's finances. It has been reporting losses for at least four years now.

Reliance Naval ended 2017-18 and the quarter ended June with a consolidated loss of Rs 1,011 crore and Rs 347.1 crore, respectively.

Last month, Anil Ambani resigned as the director of the debt-ridden firm to comply with India’s companies law. Earlier in April, the company’s auditors had raised doubts about its ability to continue as a going concern.

The stock gained 4 percent today ahead of the announcement. It has fallen over 67 percent this year.