Reliance Defense, which has Rs 12,600 in bank debt, has sought another Rs 400 crore in priority loans and a separate non-fund based limit of Rs 1,000 crore.
MUMBAI: Anil Ambani's ambitious defense plans appear to have hit a speed bump with bankers seeking his personal guarantee on loans to Reliance Defense and Engineering to replace that of former promoter Nikhil Gandhi, said people aware of the matter. The Ambani-run Reliance Group took over Pipavav Defense from Gandhi last year and renamed it Reliance Defense in March.
The company asked bankers led by SBI and IDBI Bank to release personal guarantee furnished by Gandhi and offered a corporate one instead, to which the lenders said they want one from Ambani.
There was no reply to an email sent to Reliance Group on Saturday "Unless the stalemate is resolved, lenders may not go ahead in providing additional funding that the company needs for its existing project," said a bank executive who did not want to be named.
Reliance Defense, which has Rs 12,600 in bank debt, has sought another Rs 400 crore in priority loans and a separate non-fund based limit of Rs 1,000 crore. The first refers to credit that gets paid back on a priority basis and the second is in the nature of bank guarantees, critical in securing defense deals. Reliance Defense is among the few to have been licensed and contracted to build warships, a segment that's just been opened to the private sector.
At a recent high-level meeting of the company and its bankers, Reliance Defense had proposed a corporate guarantee from group unit Reliance Infrastructure. The lenders were said to be insisting on one from Ambani.
Reliance Group acquired 18% of Pipavav Defense in an all-cash deal amounting to Rs 819 crore in March 2015. It bought another 11.2% stake in the company for Rs 545 crore in an open offer. Gandhi's SKIL Infrastructure held a 23.6% stake in the company as of June 2016.
GROUP TO RAISE STAKE
The company proposes to raise Rs 1,200 crore through a rights issue in which Reliance Group is expected to raise its stake by buying shares due to Gandhi. At the meeting mentioned above, the company informed lenders that the Reliance Group stake would rise to 36%.
In a notice to exchanges, the company has said that proceeds of the issue will enable Reliance Defence to exit from the corporate debt restructuring (CDR) process and strengthen its financial position. CDR involves distressed borrowers and lenders agreeing to easier loan terms.
Reliance Defense posted a net loss of Rs 134 crore for the June quarter against a loss of Rs 167.2 crore in the year-earlier period. The stock crashed 13.5% to Rs 56.35 on the BSE on Monday.