Reliance Naval faces a strong cash crisis
New Delhi, September 4 () The leader of Anil Ambani, Reliance Naval u0026 Engineering, said he is facing a serious cash flow crisis, which is affecting existing orders in the absence of a debt resolution plan.
Reliance Naval and Engineering Ltd (RNAVAL), formerly Reliance Defense and Engineering Ltd, is the first private sector company in India to obtain the license and contract to build warships and the largest integrated naval construction facility.
The Company faces several challenges that are impacting its operations. There is a serious cash flow crisis since the expected Debt Resolution has not yet been updated. This is impacting the progress of existing projects that lead to extended deadlines and, therefore, to the erosion of trust among customers, he said in his annual report.
The lack of new orders has led to a significant reduction in the current level of operations compared to its capacity, said Debashis Bir, CEO of RNAVAL.
The company houses a modular shipbuilding facility with the capacity to build fully manufactured and equipped blocks.
Considering this and based on the valuation report taken from an independent expert, the Company during the year has provided for the deterioration of property, plant and equipment and capital work in progress of Rs 8,13,289 lakhs and advances and accounts receivable for Rs 88,320 lakhs, said Bir.
Although the defense and strategic sectors (such as oil and gas) of India have a great requirement of ships for the Navy of India, the Coast Guard of India and large oil and gas companies, but changes in The level of policy provoked by the government to improve defense production has not led to any significant increase in shipbuilding orders for the private sector, as many of these orders were sent to PSU/DPSU by nomination.
As of March 31, 2019, the company had outstanding loans based on funds of Rs 7,835 crore crore (including interest) taken from banks and financial institutions.
The annual report says that, in the absence of the termination of defense contracts, the company's earnings were insufficient to pay off the debt.
In fact, he further increased his financial stress. The company is in discussion with the lenders and hopes to achieve the resolution of the debt, he said, adding that one of the lenders has filed an application with the National Company Law Court. , Ahmedabad, seeking debt resolution under the IBC process. They also filed an application against the company in the Debt Recovery Court, Ahmedabad.
Previously, RNAVAL auditors had raised doubts about the company's ability to continue as a going concern.
In his notes to the company's 2017-18 income statement, auditor Pathak HD u0026 Associates listed the cash losses, network erosion, repayment of loans by secured lenders, current liabilities are substantially higher than assets and few operational creditors file settlement requests as major concerns
These conditions indicate the existence of a material uncertainty that may cast significant doubts about the company's ability to continue as an ongoing business, the auditor said.
The ongoing business assumption depends on the approval of the resolution plan related to the bankruptcy of the company by the secured lenders, its ability to raise financing, the generation of cash flows in the future to meet the obligations and obtain earnings in the future, he had said. The Reliance Group, led by Anil Ambani, acquired in 2016 the controlling interest in Pipavav Defense and Offshore Engineering and renamed it Reliance Defense and Engineering. NAM BAL