A consortium led by Mumbai-based industrialist Nikhil V. Merchant has won the protracted race to acquire the debt-laden Reliance Naval and Engineering Ltd, originally known as Pipavav Shipyard.
Sources have told Business Today TV that Hazel Mercantile Pvt Ltd, the consortium backed by Merchant and partners, emerged as the top bidder by a wide margin on the conclusion of the third round of bids on Monday.
The Committee of Creditors (CoC) had over the last month held negotiations with the bidders and sought higher offers. Hazel Mercantile, which had earlier offered Rs 2,400 crore for the shipyard, is learnt to have revised its bid upwards to Rs 2700 crore.
Lenders led by IDBI Bank have been keen for an early resolution of the shipyard by a genuine investor. The shipyard was taken to the National Company Law Tribunal in January last year by the lenders to recover close to Rs 12,429 crore in outstanding loans.
Among the top 10 financial creditors to the firm are State Bank of India with an exposure of Rs 1,965 crore, and Union Bank of India with around Rs 1,555 crore of outstanding loans.
Originally, three bids had been received for Anil Ambani’s Reliance Naval, including one backed by a Dubai-based NRI that offered the lenders only Rs 100 crore. The second, a slightly higher bid of Rs 400 crore, had been put in by steel tycoon Naveen Jindal’s group, which wanted to convert the shipyard into a steel processing facility instead of using it for building warships.
The CoC will now put the winning bid to a formal vote, before beginning the process of handing over the struggling shipyard to Hazel Mercantile.
Merchant, who has a billion-dollar LNG port and regasification terminal project coming up adjacent to the shipyard, is the Managing Director of Swan Energy Ltd. The industrialist plans to build frontline warships and submarines at the shipyard and tap into the significant synergies between his port, LNG facility, and the shipyard.
The shipyard also has strategic significance as it is viewed as a facility that could play a role in contributing to the Modi government’s plans for “aatmanirbhar” defence production.
Reliance Naval is touted as a world-class facility in the private sector and is said to possess the second largest dry dock globally.
The shipyard had received India's first license and contract to build surface ships, followed by prestigious contracts from ONGC, Coast Guard, and Norwegian billionaire George Fredrickson. However, the company went into insolvency and last year, the Indian Navy cancelled a contract for six patrol vessels due to delays in delivery.
A successful transaction would also be significant given that other industry peers like ABG Shipyard and Bharti Shipyard have seen the lenders recover virtually nothing of their outstanding loans.
Both ABG Shipyard, with a debt of around Rs 20,000 crore, and Bharti Shipyard, with nearly Rs 13,000-crore debt, have gone into liquidation after the bidding failed.
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