The Indian ministry of defence (MoD) has terminated the contracts with India's ABG Shipyard, which already was out of the race for $2.6-billion four Landing Platforms Docks (LPD).
This comes as another serious setback to the Shipyard after it was listed as non-performing asset (NPA) accounts by the Reserve Bank of India (RBI) for fast resolution under the insolvency law.
ABG Shipyard has failed the corporate debt restructuring (CDR) carried out by ICICI bank.
The Financial Express reported that keeping in mind the poor financial health of the shipyard, the MoD has written to ABG that their old contracts are terminated.
“The MoD through a letter to ABG Shipyard has cancelled contracts including Cadet Training ship; Coast Guard Training Ship and Naval vessels. This is through a letter dated May 16, 2017, under Article of the Main & Option Clause contract,” said sources.
The ministry of defence (MoD) is keen to indigenously build four such warships, which will be the biggest-ever made in the country other than the under-construction 40,000-tonne sea-borne aircraft carrier INS Vikrant.
ABG Shipyard's total revenue declined from a high of Rs 2,433 crore in FY12 to just Rs 38 crore in FY16. In three years up to FY16, the company logged in a total net loss of Rs 3,755 crore. It had a gross debt of Rs 8,742 crore while its total assets were less than its debt at Rs 5,926 crore.
The company had a negative net worth of Rs 2,822 crore. Surprisingly, the company's share price remained flat in the past three trading sessions at Rs 10.50 even after RBI's NPA crackdown announcement.