Liberty House in talks to buy beleaguered ABG Shipyard

Decision likely in 10 days; debt-laden shipbuilding company named by RBI for NCLT proceedings

UK-based Liberty House, which recently bought Tata Steel UK’s speciality steel business, is in talks with debt-laden ABG Shipyard for a buyout. 

“Negotiations are on. There will be more clarity on the deal within the next 10 days,” a source close to the development told Business Standard.

The Reserve Bank of India had asked banks to take ABG Shipyard to the National Company Law Tribunal (NCLT) for debt resolution. The Liberty House proposal could be presented as a “pre-approved package” before the tribunal.  

Liberty House, which has revenue of $6.8 billion, owns SIMEC Shipping, which operates the group’s port facilities and administers chartering, leasing and ownership of vessels. The division’s business development includes re-handling, offshore transshipping and barging. SIMEC Shipping currently has no presence in shipbuilding.

SIMEC Group was also in talks with ABG earlier for its cement business in Gujarat. According to the SIMEC website, the company is poised to complete purchase of a controlling stake in ABG Cement.

The rationale for Liberty House entering India's loss-making shipbuilding industry is not clear.

“Liberty House has in-house expertise in this segment and via this acquisition this expertise could be put to use,” explained the source.

Calls and emails to ABG Shipyard went unanswered.

In May, the Sanjeev Gupta-led Liberty House completed a £100-million transaction to acquire the speciality steels division of Tata Steel UK. The company bought the Tata Steel UK unit without its liabilities and plans to invest up to £20 million in the business.

ABG Shipyard has been grappling with mounting losses for several years due to suspension of operations at the Dahej yard and slow operations at Surat. The net worth of ABG Shipyard was fully eroded on March 31, 2016, and it carries Rs 10,000 crore of debt. 

The company has not been able to deliver vessels on time because of unavailable working capital.

ABG Shipyard is among the 12 most indebted companies listed by the Reserve Bank of India for liquidation proceedings.

“According to the NCLT’s mandate, the company will get 180 days to find a buyer. If it is unable to bring a buyer to the table, a liquidator will be appointed. This is the last chance for the company before liquidation begins,” said an executive with Punjab National Bank, one of the lending banks to ABG Shipyard.

Sources said ABG Shipyard was facing difficulty in finding a buyer because of silting at its facility, which would mean the new buyer would have to invest a hefty sum apart from taking up the debt liabilities and wages due.  

ABG Shipyard's situation is not unique, rivals like Bharati Shipyard have also been affected by the weak business climate.

A protracted global downturn in the shipbuilding industry has left most shipyards in the country idle due to lack of orders and liquidity issues.