‘Bad loan’ tag increases pressure on ABG Shipyard

‘Bad loan’ tag increases pressure on ABG Shipyard

Mumbai: India’s largest private sector shipbuilder, ABG Shipyard, has missed loan repayments to some lender banks, which have classified the account as a ‘bad loan’. This, in turn, has put pressure on other banks in the lending consortium, to follow suit, and declare their loans to ABG to be in the ‘non-performing asset’ category.

DCB Bank, a small bank which is not a member of the corporate debt restructuring cell, has classified its exposure of INR650m ($10.2m) to ABG as a ‘bad loan’. The same is the case with ICICI Bank, which has significantly larger exposure to the shipbuilder.

ABG Shipyard, in 2014, had loans aggregating INR110bn restructured due to stress in business, and managed to win an easier term to repay loans through the corporate debt restructuring (CDR) programme. The concessions included elongation of tenure and reduction of interest charges.

However, it failed to meet even the liberal norms set by the 22-lender consortium that included State Bank of India, Bank of India, Canara Bank, Standard Chartered Bank and IDBI Bank. The banks have now been forced to identify the company’s assets that may need to be sold to recover the bad loans.

ABG Shipyard’s executive director Dhananjay Datar has, however, sought to downplay the seriousness of the situation, and asserted that delays were part and parcel of the business cycle, especially in the current economic framework

“I must tell you, we have the full backing of banks and institutions. The government has understood the importance of the shipbuilding industry for economic growth, employment and self-reliance in defence,” Datar said.

Shirish Nadkarni

Shirish Nadkarni is a management consultant and freelance international journalist, who has been writing on all spheres of Indian business for the past three decades for a number of reputed overseas publications. An avid sportsman, Nadkarni has represented India in international veterans' badminton since 1997, and was the 55+ age group doubles world champion in 2005.

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