Shares of ABG Shipyard Ltd opened up 5% on Wednesday from the previous close and were locked in the upper circuit since morning on news that UK’s Liberty House is in talks to buy the beleaguered company, which is one of the 12 firms on the Reserve Bank of India’s list to be forced into bankruptcy under a new regulation for failing to repay their debts. Liberty House was recently in news in India for buying out Tata Steel UK’s specialty steel business.
ABG Shipyard’s shares opened at Rs 13.72 on BSE today and were immediately locked in the circuit for the day. Meanwhile, the benchmark BSE Sensex was flat today at 30,955 points, failing to recover after tumbling yesterday. Liberty House is in talks to buy the debt-laden ABG Shipyard, which the RBI has directed the banks to take to the National Company Law Tribunal (NCLT) for debt resolution, Business Standard newspaper reported today citing unidentified sources.
The Reserve Bank of India has identified 12 accounts with large unresolved NPAs (non performing assets) for speedy action on recovery of dues. The central bank has directed the lead banker IDBI Bank to initiate insolvency proceedings on Lanco Infratech, which has about Rs 18,000 crore in unpaid dues. Meanwhile, bankruptcy proceedings have already been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd, other news reports said.
Earlier May, the government notified an ordinance for speedy resolutions of NPAs in efforts to deal with the problem of India’s chronic bad loans, which have surged to to Rs 9.63 lakh crore. According to the RBI, top 12 bad loan accounts make up for Rs 2.5 lakh crore of bad debts, or 25% of the total.
The ordinance gave powers to the RBI to direct banks to initiate bankruptcy proceedings against bad debt accounts under the Insolvency and Bankruptcy Code 2016 (IBC). Shares of most of the nine listed companies out of the 12 on the RBI’s list are on a downtrend since then.
Shares of all the nine listed companies out of these 12 have been trading erratically since the news of RBI’s action, rising in spurts occasionally and falling hard at other times. ABG Shipyard’s shares have net gained about 8% so far in June, falling to a low of Rs 9.88 earlier this month.