Banks seek guarantees from Anil Ambani for loans to Reliance Defence

Banks have asked Anil Ambani to give a personal guarantee for loans to Reliance Defence and are not prepared to accept former promoter Nikhil Gandhi's guarantee.

The Anil Ambani-led Reliance Group took over Pipavav Defence from Gandhi last year and renamed it Reliance Defence. Ambani's ambitious defence plans may hit a roadblock if he does not furnish a personal guarantee.

"Unless the stalemate is resolved, lenders may not go ahead in providing additional funding that the company needs for its existing project," The Economic Times quoted a bank executive as saying.

Reliance Defence already has Rs12,600 in bank debt and now has sought another Rs400 crore in priority loans and a separate non-fund-based limit of Rs1,000 crore.

The banks have also rejected a corporate guarantee from group unit Reliance Infrastructure.

Reports say Reliance Defence wants to raise Rs1,200 crore through a rights issue in which Reliance Group is expected to raise its stake by buying shares due to Gandhi.

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.