Arcelor-Mittal has confirmed plans to participate in the fresh round of bidding for Essar Steel, confident that it would be an eligible contender regardless of the verdict on its initial offer.
“We have not received any formal notification from the resolution professional, but we can confirm it is our intention to participate in a rebid,” ArcelorMittal said in an official statement on Thursday.
Essar Steel’s committee of creditors (CoC) had rejected ArcelorMittal’s bid — and that of rival Numetal — for failing to pass test criteria laid down in the Insolvency and Bankruptcy Code (IBC). Arcelor’s statement comes after CoC’s Wednesday meeting, in which it was decided to seek bids afresh for the debt-laden steelmaker.
According to Section 29A of the IBC, the promoter of an account declared a non-performing asset is not eligible to participate in the resolution process of an insolvent company. Sources told ET that ArcelorMittal will push its application on the stock exchanges for the removal of its name as the promoter of Uttam Galva, a loan defaulter. ArcelorMittal had recently sold its 29% stake in bankrupt Uttam GalvaBSE -4.93 % Steels to the Miglani family for Rs 1 per share to meet the eligibility clause under Section 29A. The company had also exited another defaulter, KSS Petron, before submitting the resolution plan for Essar Steel. The stock exchange, however, is yet to remove the company’s name as the promoter of Uttam Galva.
Meanwhile, Numetal was also grounded for similar reasons.
Essar cofounder Ravi Ruia’s son Rewant Ruia-led Aurora Trust is a 25% stakeholder in the bidding consortium. The Ruia family is also not eligible under Section 29A as Essar Steel is a defaulter.
On whether ArcelorMittal would approach the courts, a spokesperson said: “It is not something we can comment on at this stage.” Sources told ET the company has sought legal opinion on its cancelled bid and will wait for a formal communication from the resolution professional.
Top Numetal sources told ET that it is looking at a couple of options.
The first is to tweak the consortium’s shareholding pattern and buy out Aurora Trust in which Rewant Ruia has a 25% stake. The other partners, namely, VTB Capital, Indo International and TyazhPromExport (TPE), would purchase Aurora’s stake. At present, VTB Capital owns 40% of the consortium, while Indo and TPE hold 25% and 9.9%, respectively.
The other option is to sweeten the bid. It has three components — an upfront cash payment, investments to revive nameplate capacity and future investments — each with its own weightage.
The official did not, however, specify how Numetal plans to improve the bid. The next hearing of the Numetal case at NCLT Ahmedabad is on April 4.
Separately, the CoC has decided to approach the NCLT for an extension of the 270-day deadline for the insolvency resolution at Essar Steel. The deadline ends on April 28.
It is also scheduled to vote on a decision to allow more bidders, including those that had submitted expressions of interest (EoI), to join the fray.
