Ravi Ruia’s son to lead $6 billion all-cash offer for family steel
, TNN|
Feb 07, 2018, 10.23 AM IST
Youngest Essar scion Rewant Ruia-led consortium — Nu Metal Corporation — is likely to make an all-cash offer of $5-6 billion (about Rs 33,000-40,000 crore) to retain the family's coveted asset Essar Steel. The newly formed vehicle — which will have Russia's VTB as the largest shareholder with over 40% stake — is seen facing stiff competition from Arcelor Mittal and Nippon Steel combine.
An all-cash offer could possibly be attractive for the lenders as competing offers are likely to have less cash component, besides a haircut. Essar Steel, which runs a 10-million-tonne plant in Gujarat, owes Rs 45,000 crore to lenders, though some of the banks have pegged the loan amount higher.
An arm of Bain Capital, or a second Russian investor, is expected to step in after Hong Kong-based SSG Capital pulled out of the consortium.
A decision on the consortium partners is close to being finalised. VTB has strong business ties with the Ruias and played a key role in the sale of Essar Oil to Russia's Rosneft. VTB and some of its allies are expected to participate with a $3-billion financing to help Ruias make an all-cash offer. An Essar spokesperson declined to comment.
Bids for Essar Steel will open next week. Tata Steel is seen weighing options, while Anil Agarwal-led Vedanta may table an offer. India's metals market, riding on a global commodities recovery, is predicted to almost triple to 300 million tonne-per-annum by the end of the next decade.
Rewant, the younger son of Ravi Ruia, who founded the Essar Group along with his brother Shashi Ruia, will hold at least 26% in the consortium. Some professionals, including former SAIL chief S C Verma, an ex-RBI official and a few Essar group executives are the other smaller shareholders of Nu Metal Corporation.
The consortium structure is expected to guide Ruias in the auction process without violating rules that bar defaulting promoters. Besides, it will help the family escape the requirement that promoters must clear pending dues to be eligible to bid for their own assets. The bid will have to pass scrutiny of the insolvency board. It is not the first time the Ruias are caught in a debt trap with regard to Essar Steel. The company, which was set up in the early 1990s, went into corporate debt restructuring (CDR) in 2002 and subsequently came out of the CDR fold in 2006
An all-cash offer could possibly be attractive for the lenders as competing offers are likely to have less cash component, besides a haircut. Essar Steel, which runs a 10-million-tonne plant in Gujarat, owes Rs 45,000 crore to lenders, though some of the banks have pegged the loan amount higher.
An arm of Bain Capital, or a second Russian investor, is expected to step in after Hong Kong-based SSG Capital pulled out of the consortium.
A decision on the consortium partners is close to being finalised. VTB has strong business ties with the Ruias and played a key role in the sale of Essar Oil to Russia's Rosneft. VTB and some of its allies are expected to participate with a $3-billion financing to help Ruias make an all-cash offer. An Essar spokesperson declined to comment.
Bids for Essar Steel will open next week. Tata Steel is seen weighing options, while Anil Agarwal-led Vedanta may table an offer. India's metals market, riding on a global commodities recovery, is predicted to almost triple to 300 million tonne-per-annum by the end of the next decade.
Rewant, the younger son of Ravi Ruia, who founded the Essar Group along with his brother Shashi Ruia, will hold at least 26% in the consortium. Some professionals, including former SAIL chief S C Verma, an ex-RBI official and a few Essar group executives are the other smaller shareholders of Nu Metal Corporation.
The consortium structure is expected to guide Ruias in the auction process without violating rules that bar defaulting promoters. Besides, it will help the family escape the requirement that promoters must clear pending dues to be eligible to bid for their own assets. The bid will have to pass scrutiny of the insolvency board. It is not the first time the Ruias are caught in a debt trap with regard to Essar Steel. The company, which was set up in the early 1990s, went into corporate debt restructuring (CDR) in 2002 and subsequently came out of the CDR fold in 2006
(This article was originally published in The Times of India)
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