ABG Shipyard makes big investment plans

ABG Shipyard is asking its shareholders to approve Rs 800 crore of investments and Rs 1,750 crore of corporate guarantees. That is a sizeable investment for the company which had a net worth of about Rs 1,080 crore as of March 31 2010. The company’s debt position as of March 31 2009 was Rs 1,771 crore. It has not indicated how it proposes to fund the investments but is taking shareholder approval because they exceed the limits approved under corporate law. Very few details have been given by the company on the exact purpose of these investments, except a general statement that they are to achieve long term strategic and business objectives.

It is proposing to invest Rs 40 crore as equity in Western India Shipyard, a company it is acquiring as part of a corporate debt restructuring package. So far, both companies have only reported that the court has approved a scheme of arrangement and compromise with the secured lenders of WISL with ABG as the ‘confirming party’. ABG’s investment proposal gives an indication of the kind of investments it may make in WISL. This acquisition will give it a rig and ship repairing facility, with a capacity to handle ships up to 60,000 DWT (dead weight tonnage). It will also give security of Rs 100 crore as part of the scheme and also give a corporate guarantee of Rs 75 crore.

But this is just a small part of its investment plans. It plans to invest Rs 300 crore in Calabar Shipyard Ltd. No details about this company are available. Calabar is a port town in Nigeria and if the name is any indication, then ABG may be planning an investment in the country. It is also investing Rs 3 crore as equity and Rs 380 crore as debt in ABG Shipyard Singapore Pte Ltd, a subsidiary company.

It is investing Rs 5 crore in ABG Business Venture Pte Ltd and providing a corporate guarantee of Rs 700 crore to this company. No further information is available on this company. It is also giving Rs 900 crore and Rs 75 crore of corporate guarantees to PFS Shipping (Singapore) and PFS Shipping (India), both companies belong to the ABG group. http://www.pfsshipping.com/aboutus.asp.

There are no specifics available on what these companies propose to do with these funds, how ABG proposes to fund these investments, the duration of these loans or even the stakes that the company will get in return for its equity investments. Its share price was down by 0.6% on Wednesday to Rs 258 but is up about 3% over a month ago.

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