Indian naval shipyard Reliance Naval & Engineering Ltd (RNEL) has revealed that it is facing acute fiscal pressure because of rising levels of debt and a lack of new orders.
The company, which is headquartered in Mumbai, said in its newly published annual report that its high debt – valued by the company at USD1 billion – is affecting client confidence, resulting in shipbuilding delays and a downturn in new orders.
Reliance Naval & Engineering Ltd – constructor of the Indian Navy’s Project 21 offshore patrol vessels (pictured) – has revealed “acute cash flow” problems. (Indian Navy)
“There is an acute cash flow crunch as expected debt resolution is yet to be actualised,” RNEL said in its report, referencing the company’s long-standing efforts to agree a debt restructuring package with banks and financial institutions.
“This is impacting the progress of the existing projects, leading to extended timelines and thereby leading to erosion of confidence amongst clients.”
RNEL confirmed that as of March 2019 it had debt, including interest, of INR78.35 billion (USD1 billion) and, of that sum, it has defaulted on loans worth INR64.64 billion.
RNEL said the “non-availability of working capital coupled with [a] dearth in new orders … severely impacted” its operations in fiscal year 2018–19 (FY 2018–19).
It added, “The company’s business is significantly dependent on defence contracts and in [the] absence of finalisation of any such contracts the earnings of the company were insufficient to service the debt. As a matter of fact, it further increased its financial stress.”
RNEL said it is continuing talks with its lenders and is “looking forward to achieving debt resolution”.
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