UK-based Liberty House sends plan on ABG Shipyard to NCLT

Firm likely to acquire in a few weeks; will take on part of debt dues

UK-based Liberty House has proposed a new business model to the National Company Law Tribunal (NCLT) as part of its acquisition plan of ABG Shipyard. The plan includes a ship breaking facility, along with the existing shipbuilding and repair space.

“Since the core of Liberty's business model is steel, the main plan is to generate steel scrap from ship breaking and further melt this to make heavy melting steel (HMS) that will be sold entirely in the domestic (India) market,” Sanjeev Gupta, executive chairman of Liberty House Group, told Business Standard. 

Liberty House is engaged in the NCLT process for this acquisition — the deal is expected to get cemented in the next few weeks. Liberty House will be making this acquisition through its Indian shipping subsidiary, SIMEC, which already has a stake in ABG Group's cement business.

Gupta refrained from revealing the deal size and structure. He did say a portion of ABG Shipyard's debt would be taken on by his company.

“Whatever portion of the ABG debt is reasonable, we will be taking that. The balance will go through a restructuring process, for which there is a different procedure,” he said.

The UK-based company had acquired Tata Steel's loss-making speciality business in that country last year, without its liabilities. 

As on March 31, 2016, debt-laden ABG Shipyard's debt was close to Rs 10,000 crore. With a yard in Surat, the performance has been dismissal in recent years. Shrinking revenue, widening losses and a bloating debt to equity ratio have been annual features, amid a business downcycle.

“We see buoyancy in the ship breaking business across the globe; hence, our model is around ship breaking, the biggest part of our plan. For shipbuilding, we will focus on India's defence (sector) orders, which will come as the country grows,” said Gupta. 

The issues at ABG Shipyard are not only about its drying order book and rising debt. It has also had issues of unpaid dues for ex-employees and salaries getting delayed for existing ones.

“We are yet to come to those details,” said Gupta. “We are acquiring mainly to grow this business. Sustainable employment will be part of the plan.”

Regarding other NCLT-listed stressed assets which could be of interest to Liberty House such as Essar Steel, Bhushan Steel and Monnet Ispat, he said, “We are never closed for steel assets and have been examining all assets in India which are distressed at the moment. But, we are cautious.”

Liberty House Group has no long-term debt on its account books. It has been on an acquisition spree for some time, a recent one being two British pipe mills of Tata Steel. In India, the company has bid for Amtek Auto, part of the NCLT list. 

The $6.8-billion turnover group plans to continue to look for assets and has not placed any number or investment figure for this inorganic growth. It wants a stronger presence in Britain, America, Australia, India and parts of Europe.