A grouping led by world's biggest steelmaker ArcelorMittal, mining mogul Anil Agarwal-led Vedanta and a consortium of Russia's VTB Capital-backed NuMetal and JSW today put in bids to takeover bankrupt Essar Steel in the second round of bidding.
In the first round, NuMetal and ArcelorMittal were the only two parties that bid to buyout Essar Steel but the insolvency resolution professional overseeing the auction was advised to reject both the bids owing to their promoters being linked to defaulter companies. Revised bids were due today.
Sources privy to the development said three groups bid for Essar Steel.
NuMetal, majority-owned by Russia's second largest bank VTB Group, shed Aurora Trust, which has links to Rewant Ruia - son of Essar Steel promoter Ravi Ruia, in the second round of bidding. While its promoters bought out Aurora Trust's 25 per cent stake, NuMetal aligned with JSW to make the revised bid today.
ArcelorMittal, which had been disqualified in the first round for being listed as a promoter of loan defaulter Uttam Galva Steel, bid along with Nippon Steel and Sumitomo Metal Corporation.
This after it got declassified as a promoter of Uttam Galva Steel. The company had sold its entire holding in Uttam Galva Steel before the first round of bids in February but its name had continued as a promoter on the stock exchanges, resulting in its disqualification.
Sources said Vedanta was the surprise entrant today. Vedanta has already won a bid to acquire bankrupt Electrosteel Steels Ltd in an insolvency auction.
Confirming bidding for Essar Steel, Anil Agarwal said the company has made a compelling bid. "I have put a very lucrative bid. This is a great opportunity... When we want it, we must have it."
Six firms had initially put in expressions of interest to acquire Essar Steel, whose Rs 51,800 crore of outstanding debt claims have been admitted under the bankruptcy process. These firms included Tata Steel, state-owned SAIL, ArcelorMittal, NuMetal, Vedanta and Singapore-based fund SSG.
Only ArcelorMittal and NuMetal put in bids in the first round on February 12.
Sources said JSW was interested in acquiring Essar Steel after Tata Steel's acquisition of bankrupt Bhushan Steel for Rs 35,200 crore gave it a pole position. But bankruptcy rules did not permit anyone who had not put in an EoI to bid and so it aligned with NuMetal for bidding today. Rules also bar defaulting promoters from bidding.
TyazhPromExports (TPE) of Russia and Indo International are the other shareholders of NuMetal.
The Ahmedabad bench of the National Company Law Tribunal (NCLT), which has been approached by NuMetal against the disqualification of first bid, today ruled that second round of bids cannot be opened before April 4.
Confirming bidding for Essar Steel, ArcelorMittal in a statement said its subsidiary ArcelorMittal India Pvt Ltd along with Nippon Steel & Sumitomo Metal Corporation (NSSMC) put a revised bid today. NSSMC is Japan's leading steel company, with capacity to produce approximately 50 million tons of crude steel per year with a reputation for innovation and high-quality products.
"ArcelorMittal and NSSMC have enjoyed a close collaboration for many decades cooperating high-quality downstream finishing facilities in the US including I/N Tek, I/N Kote and, since 2014, jointly acquired and turned around AM/NS Calvert which has state-of-the-art facilities in Alabama that had failed to reach its potential under its previous owner," the statement said.
Lakshmi Mittal, the Chairman and CEO of ArcelorMittal, said: "The aim of the resolution process is to find a strong, new, capable owner for Essar Steel and maximize returns to creditors. We believe that ArcelorMittal, together with NSSMC, has the most relevant credentials and experience and is the most credible owner for Essar Steel given our decades of steel industry expertise, backed up by industry leading research and development and a wide range of innovative product capabilities."
He said the consortium is eligible and has made "a strong and competitive offer".
"At the heart of this offer is a compelling industrial plan that enhances and transforms the asset. (Essar Steel's) plant in Hazira is a big integrated steel-making facility that requires dedicated knowledge and technological expertise to de-bottleneck, grow and enhance its product portfolio.
"We plan to commit significant capital expenditure to grow the asset, inject our proprietorial patents and processes and bring new high-quality products for industries such as automotive and solar to India," he said.
Kosei Shindo, President of NSSMC, said India is the most promising steel market in the world, and NSSMC has been seeking opportunities to establish a significant presence in India.
"Essar Steel is a good asset with a lot of potential and I believe that NSSMC and ArcelorMittal could provide operational experience and access to the best of global technologies that will enable Essar Steel to reach its potential and greatly contribute to the turnaround of the Indian steel manufacturing sector," he said.
Founded by Shashi and Ravi Ruia, Essar Steel was referred to the National Company Law Tribunal last year after accumulating nearly Rs 50,000 crore in debts.
Essar Steel is an integrated flat steel producer. Its main production facility is in Gujarat. It has a nameplate crude steel capacity of 9.6 million tonnes per annum, although the current maximum achievable crude steel production level is 6.1 million tonnes per annum, due to a bottleneck in the steelmaking and casting process.
Essar Steel was among the initial 12 companies identified by the Reserve Bank of India (RBI) for insolvency proceedings.