Apart from its difficulties with Standard Chartered Bank, a public sector Indian bank also has large exposure to Varun Shipping’s Singapore-based subsidiary. However, it is not clear whether the bank has exposure to the same ship which Standard Chartered financed. In some cases, Indian banks have a second mortgage on the same vessel funded by a foreign bank, said a former official of Varun Shipping.
Varun, the largest LPG carrier in the country, has been facing financial difficulties for the past three years. Employees have not been paid wages since April this year. Most of its vessels in India are either laid up or are in the drydocks.
Varun, a listed company, has outstanding debt of over ₹1,000 crore. It reported a loss of ₹120 crore for the quarter ended March 31, 2014.
Recently, the company sold one of its gas carriers to Mercator Ltd to pay drydock dues and wage arrears to seafarers.
Varun was reportedly trying to restructure its local debt through the Corporate Debt Restructuring (CDR) mechanism. With Standard Chartered now suing the promoter, it will be difficult for the company to get CDR approval, said the official.
Earlier this year, Indian maritime regulator had suspended the company’s trading licences as its vessels failed to comply with standards on safety and seaworthiness. However, a new trading licence was subsequently issued to enable the company to drydock its ships.
Apart from Singapore, Varun also has vessels registered in Cyprus and Indonesia.
Varun shares closed at ₹8.04 on the BSE on Thursday.