Numetal may revise its bid for bankrupt Essar Steel and exclude the Ruias if their presence in the consortium is found to be in violation of the Insolvency and Bankruptcy Code (IBC), according to VTB Capital, the dominant partner in the grouping.
Having Rewant Ruia’s Aurora Investments as a minority shareholder of Numetal doesn’t contravene the rules, said Makram Abboud, vice-chairman, international, VTB Capital, citing legal opinions that have been obtained.
“If the government says that this again has changed, then we are always adaptable,” Abboud said. “We are very interested in this asset and we intend to buy this one way or the other and if the government asks us to make changes, we will have a discussion. We are always flexible when we need to be to attain our goal.”
The IBC precludes promoters from bidding to regain control of assets unless they’ve paid up their dues. ArcelorMittal, the only other bidder for the Ruia-founded Essar SteelBSE 0.41 %, isn’t eligible to bid for this reason, Abboud said.
ArcelorMittal was involved as promoter in defaulting companies, he said.
ArcelorMittal announced its exit from one of them, Uttam Galva, last month. The other company is KSS Petron, which has defaulted on loans.
ArcelorMittal couldn’t be immediately reached for comment but the company has said previously that its bid is in compliance with rules.
Numetal has enough balance sheet strength to take on the might of ArcelorMittal but Abboud didn’t put a number to its bid.
“A lot of dollars… and rupees… They won’t fit this (conference) room. That’s the best indication I will give you,” he said. “We will take the entire outstanding amount on our books—the debt is 100% ours. We are underwriting 100% debt, which is another significant cheque that we are writing, again to show our support to both Essar Steel India and our commitment to this transaction.”
Abboud added that “deep pockets” were crucial.
“Even though you say they are a big steelmaker, here you don’t need a big steelmaker. You need deep pockets as well and they don’t have that,” he said. “We do. We are a financial group with a balance sheet (in) excess of $300-400 billion.”
DUE DILIGENCE IN THE PAST
VTB has known Essar Steel for a long time, even before it got into the insolvency process, he said. “We have already done some due diligence in the past which helped,” he added, saying Russian industry has builthalftheIndian steel sector over the years. As the largest commercial bank in Russia, VTB has been heavily exposed to the companies that helped build the Indian steel sector, he said. “We have been heavily invested in India for the last four-five years and have been looking at the market for around seven-eight years,” Abboud said. “So this is not new to us and we intend to do much more. The Essar Oil sale was one of the largest transactions done ever in the history of India, so that definitely qualifies us as one of the biggest in India,” he said, referring to the $13 billion sale of Essar Oil to Rosneft.
He said Rewant Ruia’s Aurora Investments is a minority stakeholder in Numetal and doesn’t have any board seats or management role.
“Aurora is quite suitable for us and the one we know the best,” he said. “And before that selection, as I said before, we have cleared this with three major law firms that include ex-judges, who have given in writing (their opinion) that that suits the current guidelines.”
He also said the Ruias had done much to help what he described as the “renaissance of the India-Russia story” and to reduce Essar’s debt.
Key to succeeding in India was patience, he said.
“Our experience in general in India has been about patience,” Abboud said. “If you think you are patient enough, you have to multiply that by 10 to satisfy the Indian market.”
