ArcelorMittal, VTB Group in race to buy debt-hit Essar Steel

AMIPL set out a detailed industrial plan for Essar aimed at improving its performance and profitability and ensuring it can participate in the anticipated growth of India steel demand.

New Delhi : ArcelorMittal and a consortium led by Russia’s VTB Group on Monday submitted bids to takeover Essar Steel under an insolvency process, but Vedanta

Resources, JSW and Tata Steel shunned the bidding that may have touched Rs 35,000-40,000 crore.

While ArcerlorMittal may take along Nippon Steel & Sumitomo Metal Corp for the takeover, VTB used a Mauritius-based investment vehicle Numetal, where Rewant Ruia – Essar Group promoter Ravi Ruia’s son — held a 25 per cent stake.

VTB has 40 per cent interest in Numetal while the remaining is with private equity funds.

Sources said both, ArcelorMittal India Pvt Ltd, and Numetal Ltd deposited Rs 500 crore in the escrow account to convey their interest in Essar Steel. Sources said though initially showing interest, Vedanta did not bid after it made the highest bid for bankrupt Electrosteel Steels. The company owns an iron ore mine in Jharkhand where value addition was a condition. Electrosteel helped it meet the condition and so it did not bid for Essar Steel, they said.

Tata Steel and JSW too did not put in the bid at the close of bidding on Monday.

Confirming the bid, Luxemburg-based ArcelorMittal said its subsidiary ArcelorMittal India Pvt Ltd (AMIPL) submitted an offer together with a detailed investment plan to address operational issues in Essar’s existing asset base. “In its offer, AMIPL set out a detailed industrial plan for Essar aimed at improving its performance and profitability and ensuring it can participate in the anticipated growth of steel demand in India,” the company said in a statement.

It also highlights the extensive experience and track record of the group in the successful acquisition and integration of under-performing assets, which AMIPL believes would be of considerable value to Essar,” it said.

Essar would also have access to the deep bench of technical expertise and knowledge from across the group which is unparallelled in the steel industry, it added.

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. Besides Essar Steel, ArcelorMittal had also shown interest in other debt-hit steel makers like Bhushan Steel and Bhushan Power & Steel, which are also being auctioned.