Once considered a powerhouse in shipbuilding with an order book of Rs 16,600 crore, Gujarat’s ABG Shipyard is now under probe for fraud. On a complaint by the State Bank of India, the CBI recently booked ABG Shipyard, its directors, and ABG International Pvt Limited for allegedly causing losses of Rs 22,842 crore to a consortium of 28 banks.
A decade of losses.
Until the end of 2012-13, ABG Shipyard was thriving, with a net profit of Rs 107 crore. The slide started the following year, with a loss of Rs 199 crore. By March 2016, its net loss had mounted to Rs 3,704 crore, up from Rs 897 crore in 2014-15. Revenues had fallen to Rs 37 crore, from Rs 401 crore a year earlier.
The company undertook a debt restructuring exercise in 2013-14. In its annual report that year, it cited the cancellation of new ship/vessel orders, reduced lending from banks, high borrowing costs, low capacity utilisation of the Dahej shipyard in Surat, and the expiry of the Centre’s shipbuilding subsidy scheme in 2007.
An independent auditor’s report, annexed with ABG Shipyard’s annual report for 2015-16, mentions legal proceedings by some creditors, and a showcause notice from the Directorate of Revenue Intelligence, Mumbai, alleging fraud by ABG employees. The report said the auditor and the management had not noticed or reported any fraud.
Registered with the Registrar of Companies in Ahmedabad, ABG Shipyard Ltd was incorporated as Magdalla Shipyard Pvt Ltd in March 1985. It became ABG Shipyard Pvt Ltd in May 1995 and ABG Shipyard Ltd in June 1995.
Between 1990, when it delivered its first ship, and 2013, it built over 165 ships, 80% of them for international customers. In 2000, it got its first government order to build two inceptor boats for the Coast Guard; in 2011, the Centre gave it a licence to build defence ships, including submarines.
By February 2012, ABG Shipyard had an order book of Rs 16,600 crore. Its main shipyard was spread over 35 acres on the banks of the Tapi in Magdalla, Surat. It later set up a second shipyard in Dahej, Bharuch, 150 km from Magdalla, following an MoU with the Gujarat Maritime Board for a long-term lease of land and waterfront usage.
The company signed MoUs for large projects at the Vibrant Gujarat summits, including one of Rs. 2500 crore for a third shipyard.
Acquisitions and subsidiaries
ABG Shipyard acquired UAE-based Crossocean Ship Repair Limited, FZE, Fujairah on January 22, 2006, but sold it off in March 2008. In 2007-08, ABG acquired Vipul Shipyard, adjacent to its Magdalla shipyard.
A key acquisition was of Western India Shipyard Limited (WISL), Goa, through a deal with ICICI Bank and other lenders. ABG held a 60.15% controlling stake in WISL, which repaired ships of the Navy, Coast Guard, and private players. It recorded its highest turnover of Rs 114 crore in 2010-11, before slipping into the red in 2012-13. The company suspended ship repair operations in 2016. In 2015-16, its promoters decided to disinvest in it.
ABG International Pvt. Ltd. was the holding company. ABG Shipyard had a controlling stake in Eleventh Land Developers Pvt Ltd, ABG FPSO Pvt, and Vipul Shipyard. At various points, it had over 55 subsidiary companies.
Seizure and liquidation
In 2007, ABG Shipyard inked a Rs 50-crore MoU for a maritime university. On Monday, the Gujarat Industrial Development Corporation (GIDC) on Monday took possession of 1.21 lakh sq m of land allotted in Icchapore, Surat, for the university. "We have taken back possession of the land as it was not used for the purpose allotted to the company," GIDC vice-chairman M. Thennarasan said.
The plot had been allotted at Rs 700/sq m, 50% of the prevailing premium price of Rs 1,400/ sq m, a concession red-flagged in the CAG report tabled in the Assembly in 2014. The CAG also found the Gujarat Maritime Board (GMB) was not taking action against the shipbuilder for non-payment of lease rental. GMB officials confirmed that dues from ABG Shipyard are still pending.
In an order on April 25, 2019, in ICICI Bank vs ABG Shipyard, the National Company Law Tribunal (NCLT) ordered the liquidation of the company under Section 33 of the Insolvency and Bankruptcy Code. In December 2020, the NCLT’s Ahmedabad bench allowed the liquidator to carry out a private sale of assets, after an auction found no bidders. Apart from five ships, the assets being liquidated are 92,000 sq m of residential land in Bharuch and Gaviar, 4.14 lakh sq m of industrial land near Magdalla port, and 27 acres of agricultural land in Diamond Harbour, Kolkata.