Every story has a villain or grey shades and Make in India’s defence thrust on private companies is no different. It is something known to all but unearthed. However, we all must voice before we again roll up our sleeves in damage control of a collapsed system.
Defence was the keystone of NDA Govt.’s make in India initiative, when announced. It was the vision of PM, Narendera Modi to involve the private sector as the strategic partner in mega defence projects. Under make in India, the policy provide exclusive rights for the local companies to execute on large defence projects with assured orders, and encourage them to tie up with foreign manufactures for their expertise. It also has eased export regulations and rules for Indian companies.
There are many grey areas in the projects awarded to private sector by Defence ministry. We have seen how our banking system functions which bleeds with major NPA problems resulting due to improper transparency and due diligence in loan disbursement. It is no hidden fact also that flawed corporate governance and fraudulent activities gave birth to financial scams likes of Satyam, UTI, Sardha Chit fund, Sahara, NSEL and many more.
In the name of make in India in Defence, orders are given to many such Indian companies which are bleeding with losses and debt ridden. Their managerial performance is such that they are frequently defaulting on Bank interest payment and have many pending litigation cases against them. Media has not dig into this space but more and many such skeletons will surely emerge.
# Punj Lloyd: The Company was once the leading EPC player and had strong financials but today financial are in poor health and it looks like an ailing Giant near the grave. Company has many pending litigation cases while it almost crashed in settling the SABIC litigation case and has to sell over 100 year old Simon carves for $2 million. The poor management approach has also eclipsed the PL Engineering, its Indian subsidiary.
Please refer to below table which clearly speaks of pathetic company performance and financials:
| Total Debt (cr.) | 6113.9 | ||||
| Financial Year | 2013 | 2014 | 2015 | 2016 | 2017 |
| Sale (cr.) | 11408.2 | 10854.9 | 7090.26 | 4447.02 | 4867.28 |
| Net Profit (cr.) | -29.09 | -643.87 | -1154.19 | -2077.8 | -864.71 |
Above facts are certainly overlooked by Defence Ministry while awarding projects to Punj Lloyd which is incurring continuous losses for over 5 years and has total debt burden of 6113.9 cr and also frequently defaulting on its interest payments towards banks.
The Defence ministry relied on Punj Lloyd to execute and deliver defence orders while company failed miserably for improper execution and non completion of the project and has to pay claims to SABIC after intervention and orders from UK court.
# Reliance Defence and Engineering Limited (RDEL) : Started as PIpavav Shipyard co-promoted by Punj Lloyd and formerly known as Pipavav Defence and again changed its name to Reliance Naval and Engineering Ltd. is receiving orders from Ministry of defence.
The company belongs to Anil Dhirubhai Ambani Group (ADAG) and has huge debt burden in almost all its listed companies. The huge debt has forced the company to sell assets and businesses in order to bring down the debt. Also, company is very frequently defaulting on interest payments of banks. A closer look at below table can tell financial sickness of Reliance Defence:
| Total Debt (cr.) | 8951 | ||||
| Financial Year | 2013 | 2014 | 2015 | 2016 | 2017 |
| Sale (cr.) | 2680.57 | 2533.88 | 912.21 | 312.49 | 564.05 |
| Net Profit (cr.) | 31.07 | 2.64 | -370.67 | -592.75 | -577.33 |
It looks that make in India in defence is a play ground for sick and debt ridden companies to rise again with the help of flowing orders from defence and army. According to Indian mythology king Dhritarashtra was blind to all the sins and wrong doings of his son and court. This time Dhritarashtra is cloned into an institution and in all of us.
(Ajay Singh Rawat)
