Battle for India’s Essar Steel moves into courtroom (INdian Financial Times)
A battle for control of one of India’s largest industrial assets is moving into the courtroom after bids for Essar Steel from both ArcelorMittal and a Russian-controlled investment vehicle were declared ineligible under India’s tough new bankruptcy code.
Essar Steel was forced into insolvency proceedings last August after falling behind on debt repayments.
It is the most high-profile case to be dealt with under India’s new insolvency system, which came into force in 2016 after complaints about founding families clinging on to failing businesses while forcing losses on banks.
After other big groups such as Tata Steel decided against bidding for the company, a two-horse race emerged last month between Luxembourg-based ArcelorMittal and Numetal — a vehicle jointly owned by foreign companies including Russian bank VTB and a trust linked to the Essar conglomerate’s founding Ruia family.
In a statement on Monday, Luxembourg-based ArcelorMittal — the world’s largest steelmaker by sales — said it had fallen foul of the strict eligibility requirements under the new law, and would challenge the decision in court.
The decision, made by the insolvency professional handling Essar Steel’s case, is a potential blow to Arcelor founder Lakshmi Mittal’s hopes of establishing a major presence in the country of his birth.
A person close to Numetal said that its bid had also been ruled ineligible, and that it was appealing against the decision.
People close to both companies said that their respective appeals would be heard on Tuesday at a judicial hearing in Ahmedabad: the largest city in the state of Gujarat, home to Essar Steel’s flagship Hazira plant.
The difficulty for both bidders stems from a November ordinance by the government, which barred insolvent companies’ “promoters” — or major shareholders — from bidding for assets put up for sale under the insolvency code.
This blocked Essar’s founders, Shashi and Ravi Ruia, from involvement in the bid for Essar Steel. But the family was nonetheless linked to the bid by Numetal: 25 per cent of the newly formed company is owned by a Singapore-based trust that has Ravi Ruia’s son as its beneficiary.
The largest stake in Numetal, of 40 per cent, is held by VTB, which has a longstanding banking relationship with the Essar Group.
Numetal had argued that its bid was compliant with the rule because the younger Mr Ruia had had no direct involvement with Essar Steel.
But its bid proposal also included a clause stating that it was willing to remove the Singapore-based trust as an investor, should there be any concerns over the bid’s eligibility, according to a person close to Numetal.
The ruling against Arcelor, meanwhile, relates to its shareholding in Uttam Galva, a smaller Indian steelmaker that has also lapsed into default.
Arcelor hurriedly sold its stake in Uttam Galva last month before filing its bid for Essar Steel, but was not immediately removed from official records as a “promoter”, according to one person close to Arcelor.
The official record had now been updated, Arcelor said on Monday. “ArcelorMittal has always firmly believed and continues to believe that our strong and competitive bid?.?.?.?was fully eligible,” it said.
Should both companies’ appeals be rejected, the sale process is expected to be thrown open to a second round of bidding.
Vandaag blijkbaar een juridische 'hearing' in India over de vraag of de bieding rechtsgeldig was onder de Indiaase faillissementswet. AM heeft formeel protest ingediend. (andere bieder blijkbaar ook (maar deze russische bank was al grote schuldeises/financier van Essar).