ArcelorMittal is exploring the possibility of taking ownership of Uttam Galva and recovering the value in KSS Petron after paying off their dues to become eligible for Essar Steel bid.
Last week, Arcelor paid Rs 74.69 billion to financial creditors of Uttam Galva Steels and KSS Petron to clear overdue debts to be considered by Essar Steel’s committee of creditors (CoC). Around 80 per cent of the dues were on account of Uttam Galva.
Subsequently, Arcelor was declared as the highest bidder for Essar.
“As ArcelorMittal has paid Uttam Galva’s total debts and Uttam Galva has not formally entered an insolvency process, ArcelorMittal is now a significant financial creditor of Uttam Galva. It is considering whether and how to acquire ownership of Uttam Galva,” an Arcelor spokesperson said.
Uttam Galva has a cold rolling capacity of 1.2 million tonnes per annum. “It is a good quality asset and a strong synergistic fit with Essar Steel,” the spokesperson said.
For ArcelorMittal, if it does acquire ownership of Uttam Galva, it would be a second coming.
In 2009, ArcelorMittal had entered into a co-promotion agreement with the Miglani family and bought a 32 per cent stake in Uttam Galva, which paved its entry into India. The shares were purchased at Rs 120 a share.
However, in a bid to become eligible for Essar, Arcelor transferred the shares to Sainath Trading Company, a Miglani group company, at Rs 1 a share in an inter-se transfer, ahead of the submission of bid.
People familiar with the development said Arcelor could work on a consolidated plan for Essar and Uttam Galva. It was possible to double the capacity of Uttam Galva, they said.
Also, Essar has a facility in Pune that produces downstream products. “Since Uttam Galva procures hot-rolled coil and produces cold-rolled coil, galvanised steel and colour-coated products, which are value added in nature, the consolidation of Uttam Galva will increase the share of value-added products in Essar,” said Jayanta Roy, senior vice-president, ICRA.
On KSS Petron, however, Arcelor, does not envisage taking operational control, given the nature and condition of its business. “In due course, will pursue all available options to recover potential value,” an Arcelor spokesperson said.
Unlike Uttam Galva, KSS Petron is going through insolvency process and there is a lone bidder for the company.
People close to the development said some of the loans had been assigned to an Arcelor associate company, and hence, the committee of creditors (CoC) would get reconstituted.
The only way one could withdraw KSS Petron from the NCLT process at this stage was by participating in the bidding process. However, according to the spokesperson, the company was not looking at operational control of the company.
Both Uttam Galva and KSS Petron had been classified as non-performing assets (NPAs) for more than a year, which made ArcelorMittal ineligible to bid for Essar Steel under the Insolvency and Bankruptcy Code (IBC). Under the IBC, a promoter of an insolvent company is not eligible to bid for another insolvent company without paying overdues.
The Supreme Court had, however, exercised its extraordinary power under Article 142 of the Constitution in granting Arcelor and its rival bidder, Numetal, two weeks to make the payment.
Source: Business-Standard