ArcelorMittal and its partner Nippon Steel queried the inclusion of Sajjan Jindal’s JSW in the rival Numetal consortium a day after revised bids for Essar SteelBSE 0.41 % were submitted.
“In order to participate in the re-bidding, you had to have submitted an expression of interest in the first round. I don’t believe the current members of Numetal did that,” ArcelorMittal executive V-P Brian Aranha told ET.
JSW replaced Aurora Enterprises Mauritius, a Singapore-based trust of which Rewant Ruia–son of Essar co-founder Ravi Ruia–was the beneficiary.
Thus, the composition of the Numetal consortium that made the offer on April 2 was different from the one that submitted the expression of interest in October, ArcelorMittal said. Under the terms of the request for proposal (RFP), a consortium’s constituents cannot be changed in such a manner, it said.
A Numetal spokesperson rejected this. “It is Numetal Ltd and not Essar Communications or Aurora Enterprises which had submitted the expression of interest (EoI) in response to the advertisement issued by the resolution professional of Essar Steel India Ltd,” he said.
Numetal had to change the shareholding as the original EoI predated amendments that were introduced in November aimed at keeping out promoters of defaulters who didn’t repay dues or their related parties and connected persons, said sources close to the consortium.
The RFP gives potential resolution applicants full flexibility to organise their structure prior to submission of bids, said the people cited above. In the case of Essar Steel, the previous bid was cancelled and fresh bids were called. Under these circumstances, there is no restriction on who Numetal brings in as a partner or an investor, they said.
During the first round, a clause was added to the RFP to the effect that a resolution applicant can bring in an investor even after submitting the bid, provided the details of the proposed investor and the investment structure are disclosed in the bid, sources said.
Last month, lenders led by State Bank of India sought fresh offers from all the five entities that had submitted expressions of interest after the resolution professional concluded that the only two offers in the first round—from ArcelorMittal and Numetal—were not compliant with Section 29A of the Insolvency and Bankruptcy Code (IBC).
Both ArcelorMittal and Numetal have said their bids were compliant with the rules and have legally challenged their disqualification. ArcelorMittal decided to join forces with Nippon Steel, which had also submitted an EoI, on the Essar Steel bid.
JSW’s participation was a “defensive move” to block competition, he said. Moreover, if Numetal wins, it could mean JSW potentially controlling 90% of flat rolled products in key markets of western India, raising possible competition issues. “To achieve the ambitious target of increasing steel production to 300 million tonnes, India needs new players,” Aranha said.
He rejected the contention by minority shareholders in Uttam Galva that ArcelorMittal’s exit from the debt-laden company to be eligible to bid for Essar Steel had violated a “non-disposal undertaking” that it had signed with the State Bank of India.
