State Bank of India (SBI)-led lenders are extending a fresh line of credit of Rs 3,000 crore to Mumbai-based Bharati Shipyard Ltd (BSL), which is undergoing corporate debt restructuring (CDR). The lenders have appointed international management consultant Alvarez & Marsal (A&M) to script a quick turnaround at India's second-largest private shipbuilder that saw its fortunes sink in a slowing economy.
The fresh loan includes working capital requirement as well as advance payment guarantees.
With this, BSL's total debt will shoot up to around Rs 8,000 crore.
As part of its ongoing restructuring, promoters have now pledged their entire 65% stake to SBI Cap Trustee Co, a wholly owned subsidiary of SBI Capital Markets Ltd, on behalf of lenders. This follows the conversion of 2.69 lakh compulsory convertible debentures (CCD) as well as 2.52 lakh warrants that promoters had invested as part of CDR.
In 2002, BSL promoters had infused Rs 118 crore fresh capital into the debt-laden company as a precondition to its Rs 5,800 crore debt restructuring plan.
BSL is likely to call an extra-ordinary general meeting (EGM) on May 21 to seek shareholders' nod for hiking borrowing power to Rs 20,000 crore. Its current borrowing power stands at Rs 7,000 crore.
When contacted by dna, a senior banker close to the BSL restructuring process said the lenders are yet to provide the fresh loan. "This proposal is under process," he said.
The company, promoted by two qualified naval architects from IIT Kharagpur, Prakash C Kapoor and Vijay Kumar having a vast experience is ship design, ship construction, is attempting a strong comeback with the help of lenders. "We hope to achieve break-even by the end of the current financial year," said a senior company official.
At present, BSL is operating at a paltry 10% of its installed capacity – at its shipyards in Ratnagiri, Dabhol (both in Maharashtra) and Mangalore due to paucity of funds.
Over the last couple of years, its employee base has shrunk one-third to around 4,000, including contract employees, after more than 2,000 employees left the company following delay in salary payments.
Salaries for two months were paid by the company recently, thanks to the debt extended by the lenders, after a long 5-6 months' delay. Another company official said wages of several employees are still pending.
"The additional loan facility will help us restart our yards as there is no dearth of ship building orders," said the official. He claimed orders worth over Rs 8,000 crore from coast guard and Indian Navy, especially patrol vessels and offshore vessels, are pending.
As BSL faced a severe cash crunch, which in turn jeopardised ship deliveries, several customers, including state-owned Shipping Corporation of India, had invoked bank guarantees.
"With the help of advanced payment guarantees from lenders, we are seeking new customers for our ships, primarily offshore vessels," said the official.
BSL's takeover in 2009 of Mumbai-based GOL Offshore (formerly Great Offshore) surviving a tough street battle by ABG Shipyard had led it into the initial debt trap, said industry officials.