Jindal Steel, Russian team inspect Anil Ambani’s Gujarat shipyard that’s up for sale
Russia is eyeing the shipyard to buttress its pitch for building six new conventional submarines under Project 75 India, while Jindals see it as a captive client of its own.
Shipyard of Reliance Naval & Engineering Ltd
Reliance Naval is undergoing process under the Insolvency and Bankruptcy Code (IBC) and facing claims of over Rs 43,587 crore from several financial creditors, including the State Bank of India (Rs 1,965 crore), the Union Bank of India (Rs 1,556 crore) and the IDBI Bank (Rs 1,375 crore).
The National Company Law Tribunal (NCLT), Ahmedabad, in its order dated 24 February, has granted an extension of 153 days (1 September 2020 to 31 January 2021), owing to the Covid-19 pandemic, for the completion of the Resolution Process of R-Naval by August 2021.
Last year in November the United Shipbuilding Corporation (USC) and 11 other firms were given time till 30 November to submit their resolution and revival plans to acquire Pipavav. The Shipyard had earlier received interests from Chowgule Industries of Goa, APM Terminals Company and Invent ARC, among others, but all the three potential bidders have set terms unacceptable to the banks, sources said.
Industrialist Navin Jindal’s Jindal Steel and Power Limited and Russian government-owned United Shipbuilding Corporation have carried out an inspection of the Anil Ambani Group’s Reliance Naval and Engineering Limited’s (R-Naval) Gujarat-based Pipavav Shipyard for a potential buy-out.
According to sources, the Jindals completed inspection of the naval shipyard during the last week of February, while a five-member team of the Russian government concluded its inspection on 2 March.
According to sources, In addition, the Resolution Process of R-Naval has extended the bids submission date for the fifth time, to 15 March 2021.
The extension of the insolvency process for Pipavav comes at the same time when a new bidder has entered the fray — Jindal Steel and Power Limited, India’s third-largest producer of the alloy by market value.
Compounding the issue were legal hurdles to the resolution plan as the shipyard is located on a land taken on lease from Gujarat Maritime Board, and the SEZ site is taken on lease from E-Complex Private Limited, a wholly owned subsidiary of Reliance Naval.
R-Naval has already received lease termination notices from the Gujarat Maritime Board, while the E-Complex is also undergoing a resolution process through NCLT.
This means that both the sites at the shipyard are under legal dispute and whether the potential buyers will be able to use the shipyard post-takeover is not clear.
All potential bidders want assurances from the Defence Ministry and the Indian Navy, besides the Coast Guard, that orders will be given to the new buyer in order to pay for their risk and investment.
It is learnt that the government is unwilling to give any such assurance to any bidder, including the Russian government, saying the yard would have to follow established rules to competitively bid for the potential shipbuilding orders.
The reason why the USC is interested in R-Naval is because the Russian firm has been eyeing the Indian Navy’s long-pending Project 75 India, under which six conventional submarines with Air-Independent Propulsion (AIP) System are to be built.
If USC acquires R-Naval, it can build new submarines in India itself, under the Make in India initiative.
Russia is eyeing the contract, worth about Rs 80,000 crore, with Moscow pitching in strongly for a joint design and production under a government-to-government agreement.
Jindals, meanwhile, see Pipavav as a captive client for the company’s shipbuilding plates.
Quoting Vidya Rattan Sharma, managing director at the steelmaker, Bloomberg reported, “We are looking at it in two ways… One is the strategic location as it is port-based and the other is that it can be a good outlet to consume our own plates.”
