ABG Shipyard: How it got into debt and defrauded 28 banks of Rs 22,842 cr

ABG Shipyard, once the largest private shipyard company in the country, is now making headlines for all the wrong reasons. The Central Bureau of Investigation has booked the shipyard, its former Chairman and Managing Director Rishi Kamlesh Agarwal and others for defrauding 28 banks of Rs 22,842 crore – far more than the Rs 12,000 crore diamond dealer Nirav Modi and Mehul Choksi had defrauded.

Finance Minister Nirmala Sitharaman told a press conference on Monday after addressing RBI board members that the ABG shipyard account had become NPA under the UPA regime. “…in this particular case with this type of measure, in fact, I should say to the credit of the banks, they took less time than average to detect these types of frauds,” she said.

The beginning

The company, which has supplied, repaired and built vessels for the Indian Navy, Coast Guard and other private vessels in many countries, was incorporated on March 15, 1985. The flagship company of ABG Group was promoted by Rishi Agarwal, a well known actor in the Indian shipbuilding industry.

ABG Shipyard Ltd (ABGSL) had the capacity to build vessels up to 18,000 deadweight tons (DWT) at Surat shipyard and 120,000 deadweight tons (DWT) at Dahej shipyards. According to the information consulted by India todayThe company had built more than 165 vessels in the past 16 years, including newsprint carriers, self-unloading and self-loading bulk cement carriers, floating cranes, etc.

Known for its build quality, ABGSL quickly gained approval from international classification societies such as American Bureau of Shipping, Lloyds, Bureau Veritas, IRS and DNV.

Within 20 years, the government had given permission to the company to build warships and other vessels for the Indian Navy and Coast Guard.

The top

ABGSL has also won contracts from the Indian government to build pollution control vessels. The company quickly launched its initial public offering (IPO) of 85 lakh shares, priced at Rs 155-185 per share, in 2005.

This was the company’s golden age as it had seen a rush of orders from Lamnalco, Cyprus, Vroon BV, as well as repeated orders from Gujarat Ambuja Cements Ltd (GACL) for a self-loading and unloading vessel .

This spike will only continue for the next few years, as the company has received contracts from all over the world, amounting to millions of dollars.

In 2009, she was selected to build 11 high-speed water-jet powered interceptors for the Indian Coast Guard, followed by a $130 million contract by the Indian Navy to build two cadet training ships and a $2.7 billion contract by the Shipping Corporation. of India the following year.

The company has even acquired many other companies and made investments around the world.

The fall

After 2012, the company began to see a decline in its financial conditions. As mentioned in the India today report, an Ernst & Young LLP forensic audit report from April 2012 to July 2017, stated that the “defendant” colluded and engaged in illegal activities, including embezzlement, embezzlement and criminal breach of trust and for purposes other than the purpose of which the funds are released by the bank.

There were indications that loans taken from banks by ABG Shipyard were diverted to other subsidiaries. ABG Shipyard had subscribed for preferred shares of ABG Singapore for an amount of 43.5 million dollars. ABG Singapore’s financial statements for 2010 and 2011 showed loans obtained from ABG Shipyard and foreign investments made by ABG Singapore.

The restructuring framework agreement concluded between ABG Shipyard and the lenders dated March 28, 2014, noted a clause: “The borrower will have made the investment of Rs 236,40,00,000 (Rupees Two Hundred and Thirty-Six Crores Forty Lakh) effected by its subsidiary ABG Shipyard Singapore Pte. Ltd. in the shares of Standard Chartered Trust (Cayman) Limited within 2 (two) months from the date of the CDR (Corporate Debt Restructuring) LoA (Letter of ‘approval).

It is suspected that payments made to ABG Singapore by ABG Shipyard were intended to misappropriate bank funds. It has also been alleged that properties were purchased using security deposits from ABG Shipyard Singapore.

The shipyard’s operations took a major boost after the financial crisis and the debt of thousands of crores. The Indian Navy subsequently terminated its contracts with ABG Shipyard.

Diversion of funds to own subsidiaries, preferential dealings, bad investments and illicit dealings by corporate directors and senior executives are just some of the reasons for the downfall of the country’s largest private shipyard. To add to this, the global crisis and the subsequent fall in demand and prices for raw materials, as well as the drop in demand for freight, have impacted its operations.

The termination of contracts also led to the accumulation of inventories, leading to a significant increase in the operating cycle, aggravating liquidity and financial problems. The industry was going through a downturn in 2015 and demand for commercial vehicles had plummeted. Also, there were no new defense orders.

The company’s accounts were declared non-performing assets on November 30, 2013. A restructuring was carried out but on July 30, 2017, it was again declared NPA.

ABG Shipyard has been referred to the National Company Law Tribunal (NCLT) for a corporate insolvency resolution process. A resolution professional has been appointed and filed an application stating that the defendants have been found guilty of violating sections 43 (preferred transactions), 45 (undervalued transactions) and 66 (fraudulent/wrongful transactions) of the Code insolvency and bankruptcy.

What he owes

CBI in its FIR named ABG Shipyard, Directors and Promoters Rishi Kamlesh Agarwal, Santhanam Muthaswamy, Ashwani Kumar, Sushil Kumar Agarwal, Ravi Vimal Nevetia, ABG International Pvt Ltd and unknown bank officials for defrauding 28 banks of Rs 22,842 crore.

CBI searched the defendants’ homes and seized incriminating documents. Bank officials are also under scrutiny for granting loans to the company while it was involved in criminal activity.

He owes Rs 7,089 crore to ICICI Bank, Rs 3,634 crore to IDBI Bank, Rs 2,925 crore to SBI, Rs 1,614 crore to Bank of Baroda, Rs 1,228 crore to Indian Overseas Bank, Rs 1,244 to PNB and more to 22 other banks.

(With contributions from Munish Pandey)

Also read: CBI delivers ABG Shipyard in biggest bank fraud case over Rs 22,800 cr

Read also: Fraud at the ABG shipyard: no delay in filing the case, according to the SBI

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