The next large account to land in the National Company Law Tribunal (NCLT) could be Reliance Naval & Engineering Company, of the Anil Ambani led Reliance Group. The company is sitting on debts totalling Rs 9,000 crore that the company has not been in a position to service for the past six months. The financial creditors led by IDBI Bank may approach the NCLT under the Insolvency and Bankruptcy Code for a corporate insolvency resolution process (CIRP).
Incidentally, this will not be the first time IDBI will be raising the issue. The lender had already filed an application for insolvency proceedings to be initiated against Reliance Naval last year.
Reliance Naval & Engineering is the new name given to Pipavav Defence and Offshore Engineering which went sick in 2013 and was taken over by Anil Ambani and renamed. His faction of the Reliance group did invest a lot of funds since 2016 when the companies changed hands. It is reported that almost all of that investment went to the debtors. Certain amount of debt restructuring had already taken place in March 2015 when the company was still with the original promoters, the SKIL Group. Many of the loans to the company had gone past the 60 days mark for debt repayments default.
Last heard, the balance sheet of Reliance Infrastructure, another Anil Ambani group company had provided for funds to be invested in Reliance Naval. This was in the balance sheet of the year ending March 2019. Reliance Infrastructure too is having trouble with its statutory auditors resigning on grounds of dissatisfaction over allocation of funds by the management.
For the record, the net loss reported by Reliance Naval & Engineering for the last financial year ended March 2019 is Rs 9,399 crore. It was just Rs 406 crore the previous year.
There is a Reserve Bank of India circular dated June 7 that said lenders were being given a 30-day window to resolve their loan accounts failing which the cases must be referred to the NCLT for bankruptcy proceedings. There are around 70 such loan accounts, each amounting to more than Rs 2,000 crore and totalling about Rs 3.8 lakh crore.
With that deadline expiring on July 7 and the proposal submitted by the management to the landers not acceptable, there is only one option left for Reliance Naval & Engineering; land up in the NCLT for CIRP.