Fraud Done by ABG Shipyard Ltd

1. RISE AND FALL OF
ABG SHIPYARD LTD
-By Pradeep K R
22SMG1R15

2. Company
Details
• ABG Shipyard Ltd. headquarters in Mumbai, where it
was founded in 1985. In Gujarat, it operates
shipyards in Surat and Dahej. Following the
purchase of Western India Shipyard Limited in
October 2010, it now runs the biggest ship repair
facility in India out of Goa.
• Rishi Agarwal is the founder of the company.
• Product manufactured are container ships, floating
cranes, split barges, anchor handling tugs, dynamic
positioning ships, offshore supply vessels, and
diving support vessels. ABG grew to be one of
India's largest privately owned shipbuilding firms,

3. Board Members of ABG Shipyard Ltd

4. Fraud by ABG Shipyard Ltd
2005-2010: Despite warning indicators from the 2008 global financial crisis, banks continue to generously lend to ABG Shipyards.
2008: ABG Shipyards is impacted by the global financial crisis, which was sparked by the U.S. housing bubble and the demise of Lehman
Brothers. Because of the company's current lack of working capital, the operating cycle has "significantly lengthened, compounding the liquidity
and financial difficulties."
March 2014: Under the corporate debt restructuring, or CDR, programme, SBI makes an effort to restructure loans to ABG Shipyard. ABG
Shipyards' inability to pay interest and installments by the due date prevents the restructuring from succeeding.
July 2016: Backdating to November 30, 2013, the ABG account has been deemed a non-performing asset (NPA).
Jan 2019: ABG Shipyard is the subject of a forensic audit by Ernst and Young LLP. It discovers fraud evidence from April 2012 to July 2017. The
audit reveals that fraud was committed "by theft, criminal breach of trust, and diversion of funds, with the purpose of obtaining illegal gain at the
expense of the bank's funds."
From 28 banks, ABG Shipyard mostly obtained three basic forms of loans. After being misdirected through 98 sister concern companies, the
funds obtained through these loans were primarily used to build personal assets.
November 2019: SBI files a complaint
7 February 2022: CBI registers a case, books ABG Shipyard and ABG International Private Ltd.
15 February, 2022: Santhanam Muthuswamy, Ashwini Kumar, and promoter Rishi Agarwal are the targets of lookout notifications from the CBI.

5. Loans taken by ABG Shipyard Ltd from Banks:
ABG SL owes a total of Rs 22,842 crore. It owes ICICI
(which was leading the consortium) Rs 7,089 crore, SBI
Rs 2,925 crore, IDBI Bank Rs 3,639 crore, Bank of
Baroda Rs 1,614 crore, Punjab National Bank Rs 1,244
crore, Exim Bank Rs 1,327, Indian Overseas Bank Rs
1,244 crore, and Bank of India

6. ABG Shipyard Ltd
Fraud Case:
1) Manipulation of accounts(higher valuation) to
get Loan from banks.
2) Routing Rs.1415 crore through vendors and
group companies to repay its own due.
3) Investing funds in BAG Singapore, which were
eventually siphoned out of the system.
4) Transferring Rs.83 crore to seven related
companies to buy properties which are not part of
ABG Shipyard fixed asset.

7. Financials of ABG Shipyard Ltd
*Data taken from Moneycontrol
website

8. Share price of ABG Shipyard Ltd
*Data taken from Moneycontrol
website

9. • No Transparency – Stakeholders not informed about the company's
activities, plans and any risks.
• Manipulation of the accounts and diversification of fund.
• No Fairness – Stakeholders at all levels not treated equitably and
reasonably.
• Not Accountable: The board didn’tregularly communicate with
stakeholders, providing a clear and understandable assessment of how
the company is achieving its business purpose.
Corporate governance
issues:

10. • Nirav Modi and Mehul Choksi is charged with defrauding Punjab National Bank (PNB) of ₹14,000
crore.
• Vijay Mallya, who was charged in a bank loan default case involving his disbanded Kingfisher Airlines
and a debt of over ₹9,000 crore.
• ABG Shipyard(2016) Banks gave loan in generous way due to which we came across another fraud by
ABG Shipyard Ltd, India’s Biggest Bank fraud case of Rs22,842 crores.
• 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, so that their NPA’s will decrease
Other Frauds:

11. 1. Proper Due Diligence: Banks and financial institutions must conduct thorough due diligence of the
organizations to be sure of their creditworthiness, authenticity and the ability to repay the loan.
2. Strong Authentication: Implement strong authentication processes to ensure that loan applications are
made by authorized personnel of the organization.
3. Proper Documentation: Ensure that all loan applications are accompanied by the necessary
documentation and supporting evidence, including financial statements, tax returns and other relevant
information.
4. Regular Monitoring: Banks and financial institutions must regularly monitor the loan portfolio and keep
track of the loan repayments, and take corrective actions when necessary.
5. Cross Verification: Cross-verify information provided in the loan application with third-party sources
like credit bureaus, government agencies and other financial institutions.
Recommendations:

12. THANK
YOU