ArcelorMittal, the world’s largest steel producer and Numetal, the latest commodities entrant, which is backed by Ruias, will battle it out to acquire Essar Steel. On Monday, billionaire Lakshmi Mittal’s ArcelorMittal, through its India arm, placed its bid for Essar Steel, which has been put on the block through the insolvency process. Numetal has been set up in Mauritius by Ruias in a majority partnership with Russia’s leading bank VTB. Rewant Ruia, the younger son of Ravi Ruia, is spearheading the family’s interest in Numetal.
Mittal said Essar Steel is a “compelling opportunity” to “enter the high growth Indian steel market”. The $69-billion ArcelorMittal recently sold its stake in Uttam Galva, which too is facing insolvency proceedings, so that it could qualify to bid for Essar Steel. One of the largest players in the country, Essar Steel owes £4.75 billion to lenders, but its total debt, including to other creditors and suppliers stands at £7.80 billion.
Anil Agarwal’s Vedanta, Sajjan Jindal’s JSW Steel and Tata Steel, which were in contention, didn’t participate in Monday’s auction process. Both ArcelorMittal and Numetal have submitted an attractive ‘cash offer’. However, there is speculation that ArcelorMittal’s bid is in excess of the loan amount due to lenders. Besides the financial proposal, ArcelorMittal’s offer included a detailed plan to improve Essar Steel’s performance and profitability. ArcelorMittal, however, did not reveal the details of the plan for Essar Steel or whether it was bidding as part of a consortium. ArcelorMittal has joint venture partnerships with Nippon Steel and Sumitomo Metal Corporation to acquire assets in various global markets.
A deal for Essar Steel through the insolvency process is likely to go through if the bids are in excess of the liquidation value of the company, which is placed at £22 billion. The government has barred defaulting promoters from submitting a resolution plan for getting the company back on track either directly or through front companies. However, promoters can still have a go at retaining their assets by repaying all the dues to bankers. In the case of Essar Steel, banks have not recalled the loan, which means that Ruias can bid by repaying the interest overdues and penalties.
