Gujrat’s ABG Shipyard, once growing with a net profit of Rs.107 crore has been booked for fraud by CBI. Read this article to find how it caused a loss of Rs.22,842 crore to a consortium of 28 banks.
ABG Shipyard was profitable until the end of 2012-13, with a net profit of Rs 107 crore. The downward spiral began the next year, when the company reported a loss of Rs 199 crore. By March 2016, the company’s net loss had risen to Rs 3,704 crore, up from Rs 897 crore in the previous fiscal year. Revenues were down to Rs 37 crore from Rs 401 crore the previous year.
In 2013-14, the corporation went through a debt restructuring process. It cited cancellation of new ship/vessel orders, reduced bank funding, high borrowing costs, low-capacity utilisation of the Dahej shipyard in Surat, and the expiration of the Centre’s shipbuilding subsidies scheme in its annual report that year.
ABG Shipyard’s annual report for 2015-16 includes an independent auditor’s report that highlights legal procedures by some creditors and a show-cause letter from the Directorate of Revenue Intelligence, Mumbai, alleging fraud by ABG workers. The auditor and management had not seen or reported any fraud, according to the study.
In March 1985, ABG Shipyard Ltd was incorporated as Magdalla Shipyard Pvt Ltd with the Registrar of Companies in Ahmedabad. In May 1995, it was renamed ABG Shipyard Pvt Ltd, and in June 1995, it was again renamed ABG Shipyard Ltd.
It built over 165 ships between 1990, when it delivered its first ship, and 2013, with 80 percent of them going to international customers. It received its first government order to build two interceptor boats for the Coast Guard in 2000, and the Centre granted it a licence to manufacture defence ships, including submarines, in 2011.
ABG Shipyard had a Rs 16,600 crore order book by February 2012. Its main shipyard, located on the banks of the Tapi near Magdalla, Surat, covered 35 acres. Following an MoU with Gujarat Maritime Board for long-term lease of land and shoreline usage, it opened a second shipyard in Dahej, Bharuch, 150 kilometres from Magdalla.
The company signed MoUs for large projects at Vibrant Gujarat summits, including one of Rs 2500 crore for a third shipyard.
On January 22, 2006, ABG Shipyard purchased UAE-based Crossocean Ship Repair Limited, FZE, Fujairah, but sold it in March 2008. ABG purchased Vipul Shipyard, which is located next to its Magdalla shipyard, in 2007-08.
Western India Shipyard Limited (WISL), Goa, was a crucial acquisition made with the help of ICICI bank and other lenders. ABG held a 60.15% controlling stake in WISL, which repairs ships for the Navy, Coast Guard and private players. In 2010-11, it had its highest revenue of Rs 114 crore, before going into the red in 2012-13. In 2016, the firm decided to stop repairing ships. Its backers chose to pull out of it in 2015-16.
ABG Shipyard signed a Rs 50-crore MoU for a marine university in 2007. The Gujarat Industrial Development Corporation (GIDC) took possession of 1.21 lakh sq m of land given for the university in Icchapore, Surat, on Monday. M Thennarasan, the vice-chairman of the GIDC, said, “We have taken back custody of land because it was not utilized for the purpose allocated to the corporation.”
The site was allocated at Rs 700 per square metre, which was half of the current premium price of Rs 1,400 per square metre, a concession highlighted in the CAG report presented to the Assembly in 2014. The CAG also discovered that the Gujarat Maritime Board (GMB) had taken no action against the shipbuilder for failure to pay the lease rental. Officials from GMB verified that the ABG Shipyard owes them money.
The National Company Law Tribunal (NCLT) ordered the company’s liquidation under Section 33 of the Insolvency and Bankruptcy Code in ICICI Bank versus ABG Shipyard on April 25, 2019. After an auction yielded no buyers, the NCLT’s Ahmedabad bench allowed the liquidator to conduct a private sale of assets in December 2020. Apart from the five ships, the assets being liquidated include 92,000 square metres of residential land in Bharuch and Gaviar, 4.14 lakh square metres of industrial land near Magdalla port, and 27 acres of agricultural land in Kolkata’s Diamond Harbour.
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