In a huge setback to Anil Ambani-owned Reliance Naval and Engineering Ltd (RNaval), the Indian Navy has cancelled the contract worth Rs. 2500 crore for the naval offshore patrol vehicle. The reason attributed to the cancellation of the contract is a delay in the delivery of these vessels. The contract was reportedly cancelled two weeks ago due to the delay of more than 9 years.

Contract signed in 2011 but no delivery till date

Navy signed a contract to acquire five warships way back in 2011 much before Anil Ambani-led Reliance Group took over the Gujarat-based shipyard from its former owner Nikhil Gandhi. In 2015, junior Ambani's company bought Pipavav Defence And Offshore Engineering Ltd and renamed it as Reliance Naval and Engineering Ltd (RNEL).

Anil Ambani
Anil Ambani is facing worst time of his business career.Credit: Reuters

The development has come to another blow for RNEL as the company is already going through insolvency proceedings. As per a report by Hindu Business Line, three parties have decided to opt-out of the fray after submitting the initial bid. Three parties who have opted out of the process include Russia's state-owned United Shipbuilding Corporation, Chowgule and Company Pvt Ltd and APM Terminals Management BV.

The financial record of RNEL has always been in rough waters. IDBI had taken the company to NCTL Ahmedabad as the RNEL defaulted in loan repayment. It has an outstanding debt of more than Rs. 11,000 crore. The insolvency process is underway for which 12 companies including some major Asset Reconstruction Companies (ARC). But since three companies have opted out of the process, due to uncertainties, only 9 ARCs are left. The demise of RNEL could deliver a major to India's shipbuilding capabilities as two other private shipyards- ABG Shipyard and Bharati Shipyard are already under liquidation.

Indian Navy
Naval Ships Jalashwa (Representational Image)Twitter

Preferential treatment to Anil Ambani?

As soon as the erstwhile Pipavav Defence and Offshore Engineering which has already been under stress since 2013-was taken over by Anil Ambani, it managed to snap a few defence contracts under the Narendra Modi government. The government handed over the multiple projects to the company even after having trouble in servicing debts to lenders.