ABG Shipyard may lose in race for Rs 20,000-cr warships for Indian Navy

ABG Shipyard (ABGSL) may lose out in the race for the Rs 20,000-crore four Landing Platform Docks for the Indian Navy…

ABG Shipyard (ABGSL) may lose out in the race for the Rs 20,000-crore four Landing Platform Docks for the Indian Navy as the company failed the corporate debt restructuring (CDR) carried out by ICICI Bank.

The Centre wants to indigenously build four such warships, which will be the biggest-ever made in the country other than the under-construction 40,000-tonne sea-borne aircraft carrier INS Vikrant.

According to sources in the ministry of defence, once in two years the Indian Navy carries out assessment of the shipyards to see whether they have the financial and technical capability to handle big contracts for the construction of ships.

In the case of ABGSL, ICICI Bank in response to a letter that naval headquarters had issued on December 11 last year,  said, “The debt restructuring  scheme of ABGSL was approved by CDR in March 2014. As per the restructuring scheme various reliefs on debt servicing were granted including sanction of additional debt of R2,400 crore which was subject to compliance of various conditions by the company/promoter. However, as part of this the promoters were expected to get R180 crore more which they have failed to get and additional security and pledging of shares of ABG Shipyard Ltd, ABG International Ltd and ABG Singapore Pvt Ltd are still pending. “

Responding to questions from FE, Dhananjay Datar, CFO, ABGSL, said, “We are in discussion with International investors for strategic and financial investment in ABG. This is in advance stage of finalisation and should be announced shortly.   Our lead bank ( ICICI Bank) is fully involved in the process. With this, ABG will be looking  forward to larger participation in Make in India for defence programme.

“ABG is fully qualified for LPD project. Recently, MoD has sought extension of time by 6 months and similar extensions on bank guarantees which has been given,” Datar added.

Sources in the Indian Navy told FE, “The construction of the LPDs is under Prime Minister Narendra Modi’s ‘Make in India’ programme. So far decision on extending by 6 months has not been taken yet.”

While the yard along with the L&T had been shortlisted by the Indian Navy, it has not yet got approval from the Controller of Warship, Production & Acquisition, Integrated Headquarter, MoD.

Once the private firm fulfils all the requirements as recommended by the ICICI Bank,  then the stage of commercial offer will come followed by the winner being decided on the basis of the lowest bidder.

While ABG is tied up with US-based Alion,  Spanish company Navantia which designed the 13,000 tonne “Galicia” class LPD in the 1990s, and more recently the 27,000 tonne Juan Carlos I Amphibious Assault Ship for Spain has tied up with  L&T  to work  jointly on building  LPDs.

Alion is one of the largest naval architecture and marine engineering companies in the US and  currently supports the acquisition and introduction of every current US surface class as well as submarine classes.

According to Indian Navy,  construction of  two LPDs will be at the private yards at their facilities and would assist defence owned Hindustan Shipyard Limited (HSL) to construct the remaining two.  The vessel must be able to house combat vehicles (including main battle tanks, infantry combat vehicles and heavy trucks on one or more vehicle deck) and the vessel should be able to undertake all-weather operations involving heavy lift helicopters up to 35 tonne.

In December 2013 the Indian Navy floated a $2.6 billion domestic tender for construction of four LPDs and bids were sent to domestic shipyards, Larsen & Toubro (L&T), Pipavav Defence and Offshore Engineering, and ABG Shipyard.

Each of these will approximately cost Rs 6,000 crore and are expected to be delivered over the next 10 years. Each of these ships will be between 35,000 and 40,000 tonne.

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