(Editor’s Note: Updated with the outcome of today’s meeting of the lenders at paragraph 4.)

By N. C. Bipindra

New Delhi: Indian defence ministry’s hope of industrialist Anil Ambani‘s shipbuilding venture being revived through a take over by another company or operator has got into rough weather after the first round of bidding by five companies, including Russia‘s United Shipping Corporation.

According to industry sources with direct knowledge of the revival plan and process, the USC’s bid was the only one found to be viable and serious to take over the beleaguered Reliance Naval and Engineering Limited (RNEL), while rest of the bids had failed to make the cut.

This has forced the lenders, led by the State Bank of India, to extend the June 27 deadline for bidding on the Expression of Interest (EOI) document, issued on May 28, by a month to July 27. The lenders are hoping that their search for more than one eligible bidder to revive the country’s largest integrated shipbuilding facility in capacity terms could succeed.

At today’s Committee of Creditors meeting to discuss further action on the revival plan of the bankrupt shipyard, it was decided to extend the deadline for responding to the EOI till Sep. 5, according to industry sources with direct knowledge of the outcome.

However, this delay is a cause for worry, as the Ministry of Defence had recently deferred a decision on cancelling a Rs 2,500-crore ($335-million) contract awarded to RNEL in May 2011 for building five of the 2,000-tonne Naval Offshore Patrol Vessels (NOPVs). The government has already cashed the Rs 980 crore ($130 million) bank guarantees in 2018, following default in delivery of the warships in 2015.

Russia’s largest ship-building company, USC, with 40 yards, has design offices that take responsibility for all warships it builds for the Russian Navy and other foreign customers.

However, the problem with the USC proposal was the equity ownership, which would make the Russian shipbuilder ineligible to participate in Indian Navy tenders, as under the category of ‘Buy Indian‘ of the Defence Procurement Procedure, the equity ownership of a foreign company would have to be below 49 per cent, the sources said.

The Resolution Professional has also met with the defence ministry following the bidding fiasco and has sought to know, which Indian company could participate in the EOI process in the second round of bidding for the EOI.

An email requesting comments to the Resolution Professional, Sudip Bhattacharya of the Mumbai-based Duff & Phelps India Private Limited, went unanswered till late in the evening.

As reported by Defence.Capital, the Indian defence ministry is looking at the possibility of handing over the partially built NOPVs to either Mazagon Docks Shipbuilders Limited or Larsen & Toubro, both of which have vast experience building warships for the Indian Navy and fall within the criteria set for awarding of contracts based on their past work and performance.

Anil Ambani’s Reliance Group had taken over the erstwhile Pipavav Defence and Offshore Engineering Company in 2015, but could not continue to remain invested in the company and had to file for insolvency proceedings on Jan. 15 before the Ahmedabad bench of the National Company Law Tribunal.

At a time when the Anil Dhirubhai Ambani Group was still managing the company, it had made bids for a few other naval programmes, such as the Landing Platform Docks of the Indian Navy, and had also got approvals to participate in naval and coast guard shipbuilding programmes.

The United States Navy‘s Seventh Fleet too had chosen the RNEL facility at the Pipavav for repair, service and maintenance of its warships, while deployed at the Indian Ocean Region, at the the Pipavav facility in Gujarat‘s Amreli district. Yet, none of these opportunities turned business for the company to help its growth.

The other bids received by the lenders included one from APM Terminals Management, the container terminal operating unit of Danish shipping conglomerate AP Moller Maersk Group, that has been running a port near the Pipavav Shipyard. APM Terminals runs a port at Pipavav, adjacent to the yard, and its bids could be aimed at extending its own facilities, The Hindu Businessline reported recently.