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Essar Steel ownership: final bids today, three-way fight likely

A combine of ArcelorMittal and Nippon Steel, Tata Steel and NuMetal Mauritius, a consortium of Russia’s VTB Capital and the Ruia family, are likely to submit binding bids for debt-laden Essar Steel

business Updated: Feb 12, 2018 14:17 IST
Deborshi Chaki
Deborshi Chaki
Livemint, Mumbai
Essar's Steel plant at Hazira, India

A combine of ArcelorMittal and Nippon Steel, Tata Steel and NuMetal Mauritius, a consortium of Russia’s VTB Capital and the Ruia family, are expected to submit binding bids for debt-laden Essar Steel, the deadline for which ends on Monday, at least three people with direct knowledge of the ongoing bidding process of the company said.

Mining baron Anil Agarwal’s Vedanta Ltd and Sajjan Jindal’s JSW Steel, who were earlier tipped to be among the contenders for Essar Steel, which is currently under corporate insolvency proceedings, have decided to not bid for the asset, the people cited above said.

The liquidation value of Essar Steel has been fixed at Rs20,000 crore, they said.

With this, the final ownership of Essar Steel is likely to be a three-way fight, but legal challenges remain around the bids of both ArcelorMittal and Numetal.

ArcelorMittal itself has been a corporate defaulter as a shareholder in distressed steelmaker Uttam Galva Steel, which is also in the Reserve Bank of India’s ( RBI) second list of companies set to face bankruptcy proceedings. NuMetal too may face scrutiny under the amended bankruptcy laws that bar defaulting promoters from bidding for the assets.

Current Insolvency and Bankruptcy Code (IBC) laws don’t allow defaulter promoters to bid for assets under insolvency.

Essar Steel owed lenders around Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016. The company owes as much as 93% of this amount to a consortium of 22 creditors led by State Bank of India, Mint reported in August.

Essar Steel Hazira is the country’s largest single-location flat steel plant. The complex also houses a 30 million tonne per annum (mtpa), all-weather, deep draft, dry bulk port and a 515MW natural gas-operated power plant.

Mint reported in October that Tata Steel Ltd had expressed preliminary interest in acquiring debt-laden Essar Steel’s Hazira plant in Gujarat. Apart from the Hazira plant, Essar Steel operates a downstream capability hub in Pune, beneficiation plants in Bailadila (Chhattisgarh) and Dabuna (Odisha) and pellet manufacturing plants in Visakhapatnam (Andhra Pradesh) and Paradip (Odisha).

Requests for comment sent to ArcelorMittal, Nippon Steel, Tata Steel, VTB Capital and Satish Kumar Gupta of Alvarez and Marsal (A&M), the interim resolution professional for Essar Steel, remained unanswered.

First Published: Feb 12, 2018 14:13 IST