The Anil Ambani-led Reliance Group's Naval and Engineering Limited faced a turn down for liability from several lenders, including IDBI Bank, since the company has not been servicing its Rs 9,399 crore debt for many months now.
The lenders are now about to initiate bankruptcy proceedings against the firm, a source told The Economic Times. Without security or a proposal for equity investment and repayment of the full amount or a part of the loan in advance, the lenders believe that firm's resolution and liquidity is the only option for their amount recovery, said the bank executive.
"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 an upfront payment and wanted banks to convert debt into equity as part of the resolution added the bank executive.
According to the circular issued by the Reserve Bank of India on June 7, all the lenders were given 30 days to resolve approximately 70 loans, each totalling to about Rs 3.8 crore. The amount is estimated to be more than Rs 2,000 crore. If failed, the lenders must refer such accounts to the National Company Law Tribunal for bankruptcy proceedings.
Reliance Naval, earlier known as Pipavav Defence & Offshore Engineering, has been underwater since 2013, facing financial crisis under the leadership of the SKIL Group. Even after debt management in March 2015, lenders continued to keep the accounts under Special Mention Account II category, or loans that are 60 days past the due date.
The acquisition of the company by the Reliance Group helped the company stabilise after 2016. The Reliance Group provided the company financial support by investing and paying off its debt until January 2018.
In the latest accounts audit for March 2019, Reliance Infra claimed for investments in Reliance Naval. In a similar context, IDBI Bank had also filed an application last year appealing for insolvency and bankruptcy proceedings against Reliance Naval.
According to the latest audit filings, Reliance Naval has gone through a loss of about Rs 9300 for 2019 exceeding Rs 406 crore last year.