(Bloomberg) -- Reliance Naval & Engineering Ltd., controlled by Indian tycoon Anil Ambani, said it is facing an acute cash-flow crunch after orders dried up amid efforts to restructure a pile of debt.
The disclosure in the company's annual report came just before a court pushed hearing on whether to put the debt-laden company under insolvency proceedings to Oct. 3, people familiar with the matter said, asking not to be named as they are not authorized to speak to media. His wireless carrier slipped into bankruptcy earlier this year.
“There is an acute cash-flow crunch as the expected debt resolution is yet to be actualized,” Reliance Naval's Chief Executive Officer Debashis Bir said in the report. “This is impacting the progress of the existing projects leading to extended timelines and thereby leading to erosion of confidence amongst clients.”
The revival of the shipyard is crucial for Ambani, 60, who's counting on potential government defense contracts to turn the company's fortunes around as Prime Minister Narendra Modi steps up spending on national security. India's government has invited bids for $2.2 billion of warships and support vessels, part of Modi's $250 billion military modernization plan.
Policy changes brought in by the government has not led to increased shipbuilding contracts for private companies, Bir said. Shares of Reliance Naval that fell more than 90% this year extended the drop to close at 1.1 rupees in Mumbai trading Wednesday.
Reliance Naval is facing the prospect of bankruptcy after lenders rejected its debt repayment plan, Bloomberg News reported Tuesday. The firm has defaulted on a debt of more than 64.6 billion rupees as of March 31, to lenders including Union Bank of India, IDBI Bank and Central Bank of India according to its auditors' report.
A representative for IDBI, the lead lender to the company, didn't respond to an email and phone calls seeking comment on court postponing the bankruptcy hearing.
Anil Ambani's wider conglomerate is planning to dispose of assets spanning roads to radio stations, aiming to raise about 217 billion rupees ($3 billion) to help pare debt that has ballooned to about 939 billion rupees at four of its biggest units -- excluding the telecom business Reliance Communications Ltd.
--With assistance from Suvashree Ghosh and P R Sanjai.
To contact the reporters on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net;Upmanyu Trivedi in New Delhi at utrivedi2@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Sam Nagarajan, Anto Antony
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