ArcelorMittal is competing with a consortium led by Russia’s VTB Group as bids come in for Essar Steel India Ltd., the largest distressed steelmaker being sold under the country’s insolvency process, people with knowledge of the matter said. ArcelorMittal, the world’s biggest producer of the alloy, is planning a joint offer with Nippon Steel & Sumitomo Metal Corp. by Monday’s deadline, according to the people. Essar Steel could fetch a valuation of at least $6 billion in a sale, the people said, asking not to be identified because the information is private. A new Indian bankruptcy law designed to clear out distressed companies has set off a contest for more than $26 billion of steel assets, spurring interest from foreign and domestic metals giants. Essar Steel has been hurt by weak demand and reduced gas supply that affected production. The company was owned by billionaire brothers Shashi and Ravi Ruia before being brought under the insolvency resolution process in August. ArcerlorMittal will have a majority stake in the consortium with Nippon Steel and is considering making an all-cash offer, one of the people said. The VTB consortium is planning to bid through a Mauritius-based investment vehicle called Numetal, in which the Russian financial group would be the largest shareholder, the people said.
The investor group is also backed by Ravi Ruia’s son, Rewant Ruia, as well as a couple other partners, the people said.
Buoyant prices for steel and the prospect of rising demand, powered by Prime Minister Narendra Modi’s plan to spend trillions of rupees to upgrade India’s infrastructure, have been key attractions for the bidders. Essar Steel has claims of about 518 billion rupees ($8.1 billion) that have been admitted under the insolvency process. Times of India reported the planned bids earlier, citing unidentified people. Representatives for ArcelorMittal, Essar Steel and VTB declined to comment. Numetal said in an emailed statement it’s considering submitting a resolution plan for Essar Steel, and a decision regarding the price will be taken by its board later. Representatives for Nippon Steel didn’t immediately reply to requests for comment during a public holiday. Last month, Luxembourg-based ArcelorMittal announced its highest annual profit since 2011. Improved global steel markets also helped it win an investment-grade rating after a six-year wait. The company last week transferred its 29.1 percent stake in Uttam Galva Steels Ltd. to other founders, a move that analysts saw as a sign of the European giant’s plan to bid for Essar Steel. — With assistance by Jake Rudnitsky, and Anna Baraulina