Anil Ambani-Owned Reliance Naval's Bidders Propose Significant Haircuts

Anil Ambani-owned Reliance Naval & Engineering Ltd has received three bids under the Insolvency & Bankruptcy Code, two people in the know said.

The committee of creditors, which met on Wednesday, opened the bids and recorded that three bidders — Hazel Mercantile Ltd, Naveen Jindal Group and GMS, had submitted financial offers and were compliant with the IBC.

However, the offers would translate to significant haircut for lenders, the people quoted above said, speaking on condition of anonymity.

Reliance Naval has admitted claims worth over Rs 12,400 crore from financial creditors led by State Bank of India and IDBI Bank.

Hazel Mercantile is the highest bidder at this stage with Rs 2,000 crore offered to creditors. However, the bidder is only offering around Rs 700 crore in upfront cash, with the rest being paid out over time. The offer would mean that the financial creditors would have to take a haircut of over 80%.

In comparison, Naveen Jindal Group offered Rs 400 crore and GMS offered Rs 200 crore, the people quoted above said. Here too, the haircut for lenders would exceed 90%.

While the gap between the offers is large, creditors will be initiating discussions with all three bidders to arrive at the best offer. A private sector consultant will be hired to help creditors negotiate with the bidders, the people said.

Business Standard newspaper first reported the offer details on Thursday.

Resolution professional Sudip Bhattacharya, SBI, IDBI Bank, Hazel Mercantile and GMS did not respond to queries on Thursday. While Jindal group declined to comment.

Hazel Mercantile is a subsidiary of listed firm Veritas (India) Ltd, and imports petrochemicals for the group, according to the parent company's annual report for FY20. Veritas (India) is a company focussed on international trade and distribution of chemicals, polymers, paper and paper boards, metals and minerals, rubber, petroleum and fertilizers. It is also increasing its focus on logistics and infrastructure as a new business area.

Bloomberg reported in March that Jindal group was seeking to bid for Reliance Naval owing to its strategic importance and as a way to put the group's steel production to use.

GMS, headquartered in Dubai, describes itself as the world's largest buyer of ships, rigs and offshore assets for recycling.

Reliance Naval has been under bankruptcy proceedings since January 2020. The resolution process has seen delays owing to the Covid-19 pandemic.

It is among the 20 cases shortlisted by bankers for sale to the National Asset Reconstruction Company Ltd, the Indian bad bank. If the resolution process is concluded before the NARCL is operational, lenders will exclude it from the sale, the first of the two people quoted above said.

Before Anil Ambani took over the company, Reliance Naval was known as Pipavav Defence & Offshoring Ltd. The company's finances were strained even before the sale and a number of proposed resolution plans had failed.