A debt default by Anil Ambani’s Reliance Infrastructure Ltd. brought into focus the poor financial health of at least two group companies: the operator of Mumbai’s first metro line and a naval shipbuilder.
Mumbai Metro One Pvt. Ltd. and Reliance Naval and Engineering Ltd. have been reporting losses for at least four years, according to their filings. Financial troubles eroded their net worth, and the naval shipbuilder has even sought a debt resolution from lenders.
And the two need the parent’s help. Auditors to Reliance Infrastructure, in a note to June quarter earnings, had said the companies—along with three other firms—can’t survive as “going concerns” without its financial support.
That added to the cash woes of Reliance Infrastructure, according to Crisil. The company has a “significant exposure” to the five subsidiaries and associates, it said in a July 31 note. The investments, according to the rating agency, affected the parent’s liquidity and weakened its financial risk profile. Read More