With a debt of more than 9,000 billion rupees, Anil Ambani's Reliance Naval is now looking at bankruptcy

MUMBAI: The lenders led by IDBI Bank rejected the resolution plan proposed by Reliance Naval & Engineering, which has not serviced its debt of more than 9,000 crores of debt for several months.

Lenders will now begin bankruptcy proceedings against the Reliance group company headed by Anil Ambani, said a bank executive involved in the case. Lenders rejected the proposal for lack of viability. In the absence of initial proposal for capital investment or repayment of part of the loan in default, the lenders believe that the company is beyond the resolution and that the liquidation could be the only option, said the head of the bank.

"The deadline set by the RBI to materialize a resolution plan for troubled companies ended in early July and the proposal transmitted by Reliance Naval was not acceptable to lenders," said the executive . "Naval Reliance was not willing to make an upfront payment and wanted the banks to convert their debts into shares as part of the resolution."

Reliance Naval did not respond before press time Wednesday to an email requesting a comment. Under a June 7 circular from the Reserve Bank of India, lenders had 30 days to settle about 70 loan accounts, each representing more than 2,000 crores of rupees and 3.8 million crore lakh. Otherwise, they must return them to the National Company Law Tribunal for bankruptcy proceedings.

Reliance Naval, formerly known as Pipavav Defense & Offshore Engineering, has been facing severe financial difficulties since 2013, when it was under the control of SKIL Group management. Even after a debt restructuring in March 2015, its accounts with lenders continued to be clbadified as Special Referral II, or loans 60 days late.

The Reliance group took over management control in January 2016. Following the acquisition, the Reliance Group provided financial support to the company and made significant investments until January 2018. A much of this money had been used to pay lenders.

Last year, IDBI Bank filed an application to open insolvency and bankruptcy proceedings against the company. When finalizing its audited accounts for March 2019, Reliance Infrastructure planned its investment in Reliance Naval.

Reliance Naval had reported a net loss of 9,399 crores of rupees for the fiscal year up to March 2019, against 406 crores of Rs the previous year.