Share price of Reliance Defence and Engineering Ltd (RDEL), rose 9% today to reach Rs 70.70 on the NSE, after it received an approval from the Corporate Debt Restructuring (CDR) Empowered Group (EG) to exit from the CDR scheme.
The erstwhile Pipavav Defence & Offshore Engineering and now an Anil Ambani-group company, said in an exchange filing that the door-to-door tenure of its term loan has been extended to 18 years, adding that its existing debt of about Rs 650 crore will be converted into equity shares priced at Rs 59.35 each. Reliance Defence has an out debt of about Rs 6000 crore for which the tenure now stands extended.
Earlier last month, the EG, led by IDBI Bank, had approved refinancing of Rs 6,000 crore of loans to the shipbuilding company, paving the way for its participation in future naval projects, as per CNBC TV18 reports citing unidentified sources. The company’s shares had jumped on the news, rising as much as 5% at the day’s high of Rs 67. Its shares have risen 17.26 % in 2017, on the prospects of easier repayment terms on its outstanding debt, and hence the opening up of new business opportunities, including contracts from government and security agencies.
In 2016 Reliance Defence had got an approval from the Reserve Bank of India to exit the CDR scheme upon refinancing its Rs 6,800 crore worth of loans with a longer maturity of 20 years and a reduced interest rate at 11%.
The company’s exit from the debt rearrangement exercise came after Reliance Infrastructure, controlled by the Reliance Anil Dhirubhai Ambani Group, bought a 35% equity stake in Pipavav Defence & Offshore Engineering in December 2015 through an open offer, and reconstituted the board.
However, after the debt restructuring exercise, which includes conversion of Rs 650 crore of the company’s debt into equity, Reliance Infrastructure’s stake in the shipbuilder is expected to fall to 31%.
Reliance Defence, which had obtained contracts and license to build warships, has an order book worth more than Rs 5,300 crore, including from the Indian Navy and the Indian Coast Guard, PTI had reported earlier. The company houses the only modular shipbuilding facility with a capacity to build fully fabricated and outfitted blocks.