Arcelor Mittal, VTB face disqualification in Essar Steel bid: report

20 Feb 2018

A combination of ArcelorMittal and Russia's state-controlled VTB Group has failed to bid for Essar Steel's non-performing assets, which are estimated to be valued around $6 billion as advisers evaluating the offers for Essar Steel have recommended that all the bids be disqualified, reports quoting people close to the developments said.

A committee of Essar Steel lenders will meet later this week to discuss the eligibility of the proposals, the report said, quoting unidentified sources.

The interim resolution professionals overseeing the sale have been advised by legal and accounting professionals to review the eligibility of the offers from both ArcelorMittal and the VTB consortium, the report said.

While the advisers express opinions there is no certainty of their opinions being fully followed, sources added. The final decision will be made by the lenders' committee and the National Company Law Tribunal (NCLT).

ArcelorMittal is reported to have submitted a higher offer than the VTB investor group, which is backed by the son of a billionaire founder of Essar Steel, reports said.

There were only two bids for the steel company, which could fetch a valuation of at least $6 billion, people with knowledge of the matter said earlier.

Other bidders for debt-laden Essar Steel include Tata Steel and Nippon Steel, the deadline for which ended on Monday last week.

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, sources close to the development said.

The liquidation value of Essar Steel, which operates a 10 million tonne capacity steel plant in Hazira, Gujarat, has been fixed at Rs20,000 crore, they said.

Sources also said the bids by ArcelorMittal and Mauritius-based Numetal could face legal challenges even as the prospects of a three-way challenge remain.

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 is facing corporate insolvency proceedings under the National Company Law Tribunal (NCLT) after it defaulted on bank loans in December 2015.

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 per cent of this amount to a consortium of 22 creditors led by State Bank of India.

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.

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).