Lenders, ARC spar over working capital for Bharati Shipyard

Chaos continued to prevail at the funds-starved Bharati Shipyard Ltd (BSL) and shipbuilding activities at its yards have come to a naught. India's second largest private ship-builder is still awaiting a working capital loan from Edelweiss Asset Reconstruction Company (ARC), which took over the bad debts from the State Bank of India (SBI)-led lenders last month.

The private ARC, on the other hand, is in talks with distress asset funds to "arrange finances" immediately for reviving activities at BSL's yards.

Edelweiss ARC has taken over 60% of the ship-builder's debt that runs to almost Rs 8,000 crore from 11 banks after the account turned a non-performing asset (NPA) on their books. "The remaining 12 lenders in the consortium such as Punjab National Bank, Bank of Baroda, Federal Bank, Canara Bank and Syndicate Bank, among others, have not sold their debt to the ARC as the account has not turned an NPA in their books. The account will turn an NPA in September," said a senior official from BSL.

These lenders have not only refused to fund the working capital from their kitty but also rejected the Edelweiss ARC's efforts to arrange funds.

"We have asked Edelweiss ARC for Rs 100 crore immediately to support our ship-building activities," said the BSL official.

The company is operating at a paltry 5-10% of its installed capacity – at its shipyards in Ratnagiri, Dabhol (both in Maharashtra) and Mangalore due to paucity of funds.

Sibi Antony, managing director and CEO, Edelweiss ARC, is hopeful of buying out the entire debt from all other lenders in the consortium. "We are trying to turn around the company. We have bought around 60% of debt, from 11 major lenders including SBI. BSL is in need of working capital. We will arrange it through distressed asset funds and banks," he said.

Just before lenders decided to sell the debt to ARC, the troubled ship builder was hoping for a fresh line of credit of Rs 3,000 crore from them.

"This was a mix of fund-based (around Rs 900 crore) and non-fund based of Rs 2,100 crore, including bank guarantees," said Antony.

The international management consultant Alvarez & Marsal (A&M), earlier appointed by the lenders, to script a turnaround at BSL, has stepped out, after Edelweiss ARC took charge.

BSL has not paid salaries for last six months, another employee said. "There are around 2,000 employees working across several functions and yards," he said.

As BSL faced a severe cash crunch, which in turn jeopardised its ship construction and timely deliveries, several customers had invoked bank guarantees. With the help of advanced payment guarantees from lenders, BSL was seeking new customers for their ships, primarily offshore vessels.