Reliance Naval plunges 18% as auditors raise concerns

The Anil Ambani group’s woes seem never-ending after auditors of group company Reliance Naval and Engineering raised concerns about the Anil company’s ability to continue as a going concern.

Shares of the company tumbled over 18 per cent in the afternoon trade on Tuesday after the auditors Pathak HD & Associates raised doubts over the company’s ability to generate cash flows and profit after the company’s secured lenders approved a bankruptcy-related resolution plan.
In its notes to the company's 2017-18 earnings statement, auditors Pathak HD & Associates cited cash losses, erosion of networth, a substantial rise in liabilities compared to assets and loans being called back by secured lenders and petitions being filed by few operating creditors.
"These conditions indicate the existence of a material uncertainty that may cast significant doubt on the company's ability to continue as going concern," the auditor said in the note.
The company, however, attributed the failure of Anil Ambani’s ambitious gambit of buying out the erstwhile business of Pipavav Defence and Offshore Engineering to a global downturn in shipbuilding business and delay in defence contracts.
The company also on Monday said its net loss widened to Rs408.68 crore in January-March quarter of 2017-18 fiscal from Rs139.92 crore in the same period of previous financial year. For the full year 2017-18, it posted a net loss of Rs956.09 crore, compared to a loss of Rs523.43 crore in the previous financial year.
Revenue also fell to Rs34.76 crore in fourth quarter of FY18 from Rs250.84 crore in same period of previous fiscal. For 2017-18, the total income was lower at Rs413.84 crore compared with Rs564.14 crore revenue in 2016-17 fiscal.
Total expenses increased to Rs249.3 crore over Rs223 crore during the same period.
Shares of the company opened at Rs24.55 and touched a high and low of Rs25.95 and Rs22.10, respectively, eventually closing at Rs23.40, down 13.33 per cent.
The company said it has approached lenders for an appropriate resolution plan to make the operations viable and sustainable.
"Considering the strength of the company's world class infrastructure, business plans and future outlook as assessed, the management is quite confident to reach at some workable solution to resolve financial position of the company and to continue as a going concern," it said.
The Anil Ambani-led firm said it is participating in several business opportunities both in and outside India and is hopeful of getting business in coming years.
"Further, the promoters of the company have supported the company since management takeover by them in January 2016 and will continue to do so in future in their capacity as promoters," it said.
Anil Ambani-led Reliance Group had in 2016 acquired controlling stake in Pipavav Defence and Offshore Engineering and renamed it Reliance Defence and Engineering. Last year, it renamed the firm to Reliance Naval and Engineering (RNEL).