How will ABG Shipyard Fraud affect banking stocks?

For understanding the exposure to ABG Shipyard, we need to understand a few more things linked to the entity and its conduct over the years:

Mumbai HQ & Gujrat Operated – ABG Shipyard
  1. ABG Shipyard turned NPA to the tune of Rs 22,842 crore on November 30, 2013, with a majority of disbursement taking place between 2005-2012
  2. SEBI investigation into ABG Shipyard based on the letter from the IT Department in 2013 found that ABG had diverted funds to the tune of Rs. 101 Crores through bogus purchases for making investments in a company known as Second Land Developers Pvt. Ltd. (SLDPL) also known as ABG Resources Pvt. Ltd. (now known as Shivris Resources Pvt. Ltd.), also owned by the same promoters during the period of fiscal years 2008-14
  3. Between Apr 2019 and Mar 2020, several banks declared the account as a fraud based on a forensic audit conducted in 2018, and on August 25, 2020, a complaint was made to CBI by the State Bank of India
  4. The company was referred to National Company Law Tribunal(NCLT) in Ahmedabad on August 1, 2017, by the ICICI Bank for the corporate insolvency resolution process
  5. Ernst & Young(EY) had conducted a forensic audit of ABG Shipyard and submitted its report in January 2019
  6. In its report, EY had indicated that there was a diversion of funds that were provided by the banks as a part of the Corporate Debt Restructuring (CDR)
  7. SBI filed a fresh complaint in September 2020, after it closed the internal inquiry to find culpability of its staff

Now, let us come to the exposure of banks linked to ABG Shipyard

Exposure Quantum of Banks to ABG Shipyard

This scam underlines a few important things

  1. The lent amount will show up as provisioning in the balance sheet of the banks (that will dent the earnings)
  2. If the insolvency process does go ahead and a new buyer is found, banks will have to take a haircut in the recovery amount
  3. Lax norms in lending to corporates in the infrastructure-heavy sector like steel, shipping, etc. led to loans being vulnerable to default
  4. Due diligence during the lending and goal-oriented money release could have been used to hedge risk
  5. This scam underlines the underbelly of corporate India where founders are looking to swindle money rather than resurrect the company or declare bankruptcy

ABG Shipyard was a listed company and it had turned into a penny stock(like some of the Anil Ambani-led Reliance Group Stocks. Investors should refrain from buying into them with the hope of windfall gains or turnaround without understanding the nature of the business, acumen & intent of the promoters, competition, etc.

I am sharing the list of penny stocks that have jumped by more than 100% in the last year. Some or most of them can turn into illiquid security or go bankrupt.

Penny Stocks Listed in the Indian Stock Market

It is better to invest in companies that are profitable or keep money in debt instruments for making decent returns.

Hope this helps

You can follow my blog or Facebook page on investing for getting insight into other stocks.

Happy Investing!!


  1. EY likely to be a key prosecution witness in Rs 22,482-crore ABG Shipyard fraud case
  2. ABG Shipyard bank fraud under UPA, withdrawal of states consent a challenge: CBI
  3. ABG Shipyards bank fraud: Critical period of the probe is 2005-2012, to says CBI
  4. SBI and ICICI Bank investors pay the price for the nearly ₹10,000 crore lost to the biggest bank fraud ever in India
  5. Order in the matter of ABG Shipyard Ltd
  6. Anil Ambani – Live Stock Quotes, Stock Price Update, and Analysis from
  7. These 25 penny stocks jump up to 160% in the turbulent New Year

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog at

Up ↑

%d bloggers like this: