New Delhi: Anil Ambani-led Reliance Naval & Engineering has said it is facing "an acute cash flow crunch", which is impacting existing orders in absence of a debt resolution plan.
Reliance Naval and Engineering Ltd (RNAVAL) - formerly Reliance Defence and Engineering Ltd - is the first private sector company in India to obtain the licence as well as a contract to build warships and the largest integrated shipbuilding facility.
"The Company is facing several challenges which are impacting its operations. There is an acute cash flow crunch as the expected Debt Resolution is yet to be actualized. This is impacting the progress of the existing projects leading to extended timelines and thereby leading to erosion of confidence amongst clients," it has said in its annual report.
Lack of new orders has led to a significant reduction in the current level of operations as compared to its capacity, RNAVAL CEO Debashis Bir said.
The company houses a modular shipbuilding facility with the capacity to build fully fabricated and outfitted blocks.
"Considering this and based on the valuation report taken from an independent expert, the Company during the year has made provision for impairment of property, plant and equipment and capital work in progress of Rs 8,13,289 lakhs and of advances and receivables for Rs 88,320 lakhs," Bir said.
Though the defence and the strategic sectors (like Oil & Gas) of India have a very large requirement of ships for the Indian Navy, Indian Coast Guard and oil & gas majors, policy-level changes brought about by the government to enhance defence production have not led to any significant increase in shipbuilding orders for the private sector, as many of these orders have gone to PSUs/DPSUs on nomination basis.
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As on March 31, 2019, the company had outstanding fund-based borrowing of Rs 7,835 crore (including interest) taken from banks and financial institutions.
The annual report said in absence of finalisation of any defence contracts, the earnings of the company were insufficient to service the debt.
"As a matter of fact, it further increased its financial stress. The company is under discussion with the lenders and looking forward to achieving debt resolution," it said, adding that one of the lenders has filed an application before the National Company Law Tribunal, Ahmedabad, seeking debt resolution under the IBC process. They have also filed application against the company in Debts Recovery Tribunal, Ahmedabad.
Earlier the auditors of RNAVAL had raised doubts about the company's ability to "continue as a going concern".
In its notes to the company's 2017-18 earnings statement, auditor Pathak HD & Associates listed cash losses, erosion of network, loans being called back by secured lenders, current liabilities being substantially higher than assets and winding up petitions being filed by few operating creditors as major concerns.
"These conditions indicate the existence of a material uncertainty that may cast significant doubt on the company's ability to continue as going concern,” the auditor had said.
The assumption of going concern depends upon the approval of the company's bankruptcy-related resolution plan by secured lenders, its ability to raise finance, generation of cash flows in future to meet obligations and earning profits in future, it had said.
Anil Ambani-led Reliance Group had in 2016 acquired controlling stake in Pipavav Defence and Offshore Engineering and renamed it Reliance Defence and Engineering.
