ABG Shipyard Scam

MBA | SEM 4
BANKING CEC (4549292)
Prepared by:
Dhruvkumar Vanza (217370592010)
Vrajeshwari Yadav (217370592063)
• Type: Public company
• Industry: Shipbuilding
• Founded:1985
• Headquarters: Mumbai,Maharashtra,
India
• Key people: Rishi Agarwal (Chairman),
Ram Swaroop Nakra (Managing
director), DP Gupta (Vice president),
Subas Gantayat (Vice president)
• Services: Ship design, Ship building &
Ship repair
Its Yards…
SURAT YARDSHIP DAHEJ YARDSHIP
History:
• Previously known as Magdalla shipyard.
• Was formed in 1985 in Surat.
• Involved in the manufacture and repair of ships.
• Even since it delivered its first ship in 1990, the ship builders have
manufactured and delivered over 165 ships. Out of these 165, some were
even made for international markets.
• Then changed its names in ABG shipyard in may 1995 and went public June
1995. The company was successful in bagging an order from the Indian
government to make 2 interceptor boats for the Indian coast guard in
2000.
• By 2011, the company acquired the licence to build defence ships and even
submarines.
SO WHAT
HAPPENDED?
THE
ABG had taken massive
loans between 2005
and 2012. The total
amount was Rs 22,842
crore from 28 banks. 
• In 2012-13, ABG made a profit of Rs 107 crore and total revenues of Rs 2,149
crore which gave a good picture to outsiders.
• In 2013-14 however, ABG was unable to repay debt interests, so the loans were
restructured and interest rates were reduced for the company.
• From 2013-2014 onwards, ABG started posting financial losses.
• In 2014, ABG posted a loss of Rs 199 crore
• While in 2016, the losses increased to Rs 3,704 crore.
• The company gave reasons like cancellation of ship/vessel orders,
dip in lending from banks, high cost of borrowing and low capacity
utilization to justify the massive losses. 
• In 2016, SBI declared that the ABG loans had turned into a non-
performing asset since they had not serviced their loans for 3
consecutive years, even after going through extensive debt
restructuring. 
• In August 2017, the ABG case was referred
to the National Company Law Tribunal
(NCLT) for the 'Corporate Insolvency
Resolution Process'.
• In April 2018, Ernst & Young was
appointed as the forensic auditor to
investigate the bank account transactions
between 2012 to 2017.
• In Jan 2019, EY submitted reports that
showed the detailed presence of
irregularities between April 2012 and July
2017.
• The loan amounts were used to pay the
expenses of other companies and were
diverted into international securities, other
investments, and properties.
• But the investments were never shown in the books of accounts.
• ABG showed in the books that they had paid '‘Accomodation Deposits''
to companies whereas ABG had actually purchased properties for
Chief Rishi Agarwal out of the same money. ABG also breached the
debt restructuring agreements.
• In June 2019, SBI's fraud identification committee submitted a report
declaring ABG Shipyard to be a fraud company.  
• In November 2019, SBI complained to CBI and alleged criminal
conspiracy which caused losses of Rs 22,842 crore.  
• June to August 2020: State Bank of India along with other banks of the
consortium filed a complaint to CBI.
Things become really
serious…. 
• February 2022: CBI files an FIR and issues look-out notices against ABG
Shipyard and its directors. 13 locations are searched on February 12,
2022, which lead to the discovery of several incriminating documents. 
• February 2022: ED also files a money laundering case for defrauding
banks and CBI questions ABG chief Rishi Agarwal. 
• April 2022: ED conducts raids at 26 premises under the Prevention of
Money Laundering Act in Mumbai, Pune and Surat. These premises
belonged to ABG Shipyard, its sister companies and its executives. 
• 21 September 2022: CBI arrests ABG Shipyard promoter Rishi Agarwal.  
• 22 September 2022: ED attaches ABG Shipyard's assets over Rs 2,747
crore which includes shipyards at Surat and Dahej in Gujarat and
Maharashtra, agricultural lands, commercial and residential
premises, and bank deposits.  
Corporate governance issues:

No Transparency– Not Accountable: The board Manipulation of the

Stakeholders not didn’t regularly communicate accounts and
informed about the with stakeholders, providing a diversification of fund.
company's activities, clear and understandable
plans and any risks. assessment of how the
company is achieving its
business purpose.
No Fairness – Stakeholders at all levels not treated equitably and reasonably.
Frauds:
Frauds:

Usually most of the frauds happened during 2008-2015 and came to

light during 2015-2020. From then on, banks are acting in defensive
manner so that they are providing loan based on the collateral and
proper valuation.
Recommendations
Proper Documentation:
Ensure all loan applications
are accompanied by the
necessary documentation
and supporting evidence,
including financial statements,
tax returns and other relevant
information.
Strong Authentication: To
ensure that loan applications
are made by authorized
personnel of the
organization.
Regular Monitoring: Must
regularly monitor the loan
portfolio, keep track of the
loan repayments, and take
corrective actions when
necessary.
Recommendations

Cross Verification: with third-party Proper Due Diligence: Must

sources like credit bureaus, conduct thorough due diligence of
government agencies and other the organizations to be sure of their
financial institutions. creditworthiness, authenticity and
the ability to repay the loan.
Thank you!