ABG Shipyard: 3 failed attempts made since Apr 2019 to realise liquidation value 

The bankers of Gujarat-based shipbuilding company ABG Shipyard, whose promoter, Kamlesh Agarwal, is facing CBI investigations for cheating close to two dozen banks to the tune of Rs 22,800 crore, are struggling to get their money back. 

"We have made full provisions against the ABG Shipyard account. The Reserve Bank of India guidelines insist on 100 per cent provisions against a defaulter under liquidation," says a banker.

ABG Shipyard was part of the dirty dozen (12 big NPAs) identified by the RBI for bankruptcy proceedings some five years ago. The other big names were Essar Steel, Jaypee Infratech, Bhushan Power & Steel, Amtek Auto and Alok Industries.  

The bankers led by private sector ICICI Bank are hoping against hope to realise a paltry 8-10 per cent from the liquidation proceedings, which is currently underway. "There are residential land parcels, bungalows and staff quarters, agricultural land, half-finished vessels and plant and machineries for disposal under the liquidation process," the banker adds. 

The value of ABG Shipyard’s land assets is close to Rs 500 crore. In October last year, the vessel Varada Empress with a base value of Rs 8.50 crore was also put up for sale.

In fact, the total admitted claims against the company are much more than Rs 22,800 crore. Under the IBC, the current admitted claims are to the tune of Rs 27,400 crore. Apart from the banks, there are unsecured creditors (Rs 2,621 crore), operational creditors (Rs 53.89 crore) and government dues of Rs 1,878 crore. In addition, there are outstanding dues of workmen, employees etc.

As per the information available, the liquidator has made as many as three unsuccessful attempts to sell the assets of the company, which had even supplied battle practice vessels to the Indian Navy.

The outbreak of pandemic and national lockdown also affected the entire liquidation exercise. "The shorter time frame of payment of money after the completion of the auction also came in the way," say sources. 

The CBI's complaint for fraud was lodged by the SBI way back in November 2019, eight months after the resolution plan under IBC failed. This was done after a forensic audit finding of EY India. "E&Y report was placed before the fraud identification committee of 18 lenders in 2019. Fraud is mainly attributed to diversion of funds, misappropriation, and criminal breach of trust," said SBI in a statement. 

The SBI had revealed that the circumstances of the fraud, as well as CBI requirements, were further deliberated in various meetings of joint lenders and a fresh and comprehensive second complaint was filed with CBI in December 2020. 

The company's financial stress had started post the global financial crisis. The slowdown in the economy had impacted the financing to the long gestation industry. There was a steep fall in the commodity prices globally and cargo shipments also declined big time. In fact, the company also faced a slew of cancellation of ship building contracts. 

It had managed to remained profitable till fiscal 2012-13 when it reported revenues of Rs 2,149 crore and profits of Rs 107 crore. However, the financials started deteriorating after 2013-14 as falling sales revenues and higher cost including interest pushed the company in the red.  

Technically, the company turned NPA for banks by the end of 2013. The finance minister Nirmala Sitharaman had said yesterday that the ABG Shipyard account turned NPA during the erstwhile UPA regime. She is partly correct because the company underwent a restructuring under the RBI's rules in March 2014, which provided a moratorium of interest and principal amount.  The lenders led by ICICI Bank, IDBI Bank and SBI had approved a loan recast under the CDR mechanism in March 2014. A year later when the CDR failed, the company approached banks for another restructuring under the new strategic debt restructuring (SDR) scheme, but the plan didn't go through. 

By July 2016, the CDR failed and banks had to classify the loan as NPA under the RBI rules with a backdated 2013.

Also read: ABG Shipyard: How it plunged into debt and defrauded 28 banks of Rs 22,842 cr

Also read: ABG Shipyard: CBI to summon officials for questioning