Desperate for India foray, ArcelorMittal knocks Supreme Court to hear Rs 42000 crore offering for Essar Steel

Last Updated: Tue, Sep 11, 2018 14:44 hrs
A logo is seen on the roof of the ArcelorMittal steelworks headquarters in Ostrava

The insolvency proceeding involving Essar Steel has taken a new twist.

Lakshmi Mittal's ArcelorMittal Steel along with Nippon Steel and Sumitomo Metal Corporation are learnt of offering a bid worth Rs 42,000 crores to existing creditors of Essar Steel.

Most papers carried the report, however none could identify the exact contents and terms in ArcelorMittal's latest two page letter.

If news reports are to be believed, ArcelorMittal has increased its bid by Rs 11,000 crore to its initial offer of Rs 31,000 crores.

ArcelorMittal's current offer for Essar Steel outbids NuMetal's Rs 37,000 crores as well as Anil Agarwal promoted Vedanta's Rs 34,000 crore.

Satish Kumar Gupta, a resolution professional associated with the State Bank of India, admitted in a report that Essar's debts run to the tune of Rs 49,000 crores.

Even as reports of Mittal's mammoth increase in offers left the industry pondering, there have been different speculations and versions surrounding the news report.

A report in the ToI quotes on behalf of anonymous officials that existing creditors of Essar were rejoicing on the prospects of receiving dues estimated at Rs 7000 crores. This amount had been piling on the books of Uttam Galva Steels and KSS Petron.

An NCLAT tribunal ordered in March that ArcelorMittal's bids for Essar would be eligible only if it repaid dues of Uttam Galva and KSS Petron.

The previous NCLAT directive also suggested creditors to consider bids posted by Numetal after the company said that it had severed ties with the Ruias of Essar.

Also Read: NuMetal can bid for Essar, Arcelor must clear dues says NCLAT

A DNA report highlights a source referring to Mittal's offer as an "eyewash". The source observed that Mittal's company may be "buying time to beat the system".

So far, no creditor has reported of receiving any money from Arcelor for either Uttam Galva or KSS Petron.

ArcelorMittal's generosity of Rs 42,000 crores does not end here. In what appears like a height of flouting rules and laws, according to reports, ArcelorMittal says it will pay Rs 7000 crores only if it wins the bid for Essar.

The legal wrangle and the confusion does not end here though.

Bloomberg reported that ArcelorMittal had moved the Apex court to resolve the issue of eligibility. The top court is expected to hear the case on Wednesday.

Essar Steel is not only a curious case, but also a compelling business sense for steel producers worldwide. Firstly with 10 million tonnes of production, Essar is a great investment bet for current steel companies such as Numetal (backed by Russian VTB and JSW Steel) and Vedanta.

The steel industry believes that the market is in an upward trend, and that any acquisition in Essar is likely to lead to significant cost-savings and opportunities. The DNA money quotes from an industry observer who suggests that re-creating Essar's steel capacity from scratch could take 4-5 years.

Andy Mukherjee in his column on Bloomberg finds that if creditors were to accept ArcelorMittal's "bold" offer, it would secure their principal claims in full and also bring in much needed hard-currency in the form of dollars.

Mukherjee could be correct considering ArcelorMittal's offer is far higher than what Tata Steel paid for Bhushan Steel.

The bankrupt Bhushan Steel owed creditors Rs 56,000 crores, while Tata Steel offered Rs 35,000 crores. Tata Steel in a press release dated March said it received a letter of intent from a committee of creditors confirming Tatas as the best suited applicant for the acquisition.

Tata's during the Bhushan bidding process said they did not invest in Essar because Bhushan Steel was relatively newer, owned captive mines and had a bigger plant in the eastern belt.

Arcelor Mittal with a production estimated to be over 100 million tons (as on 2014) may be among the world's top five steel producers in the world. But, for Lakshmi Mittal, a man Forbes estimated as the third richest person in 2005, fewer operations back home in India have always been considered as a sore point.

Speculative theories suggest a Ghar-wapsi of sorts for Mittal. And it seems natural. Of course, Mittal may have had his own share of controversies and criticisms, but the steel-man cum philanthropist has been widely recognized as a man with a golden touch when it comes to healing bankrupt steel factories.

Mr. Mittal who has been a recognized steel healer, could become an NPA healer overnight. That, if the NCLAT approves ArcelorMittals's eligibility to bid for Essar and obviously agrees to be arm-twisted into what appears like a deal rather than resolution.

The NCLAT deadline to pay Rs 7000 crores to creditors of Uttam Galva and KSS Petron ends on September 11th. The top court will hear the issue on Wednesday

Will creditors of Essar, Uttam Galva and KSS Petron get their full dues healed?

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