ArcelorMittal hits a roadblock in bid for Essar Steel assets

MUMBAI: The ongoing bidding for Essar Steel assets seems to have hit an air pocket with the industry raising objections to the bid presented by ArcelorMittal last week. According to Section 29 A of the new Insolvency and Bankruptcy Code (IBC) framework, promoters of defaulting companies are barred from bidding for stressed assets.

Applying this logic, ArcelorMittal, technically disqualifies to bid for any stressed assets considering its 29 per cent shareholding in listed entity Uttam Galva Steel, which became an NPA last year defaulting payments and owes debt of over Rs 6,000 crore.

However, Mittal has recently sold his stake in Uttam Galva in order to emerge eligible and bid for stressed assets, particularly, Essar Steel. But Mittal is also one of the promoters of oil infrastructure company KSS, which too is a defaulter. According to the company, Mittal was not the promoter of Uttam Galva (but a mere shareholder), had no board representation and no involvement in the management of the company. Whether the insolvency professionals overseeing the bidding process will consider Mittal’s bid remains to be seeen.

With over Rs 43,000 crore debt, Essar Steel is one of the 12 stressed accounts, which RBI has listed for resolution and the bids are currently under scrutiny by insolvency professionals and the NCLT. Essar’s 10 Mt steel plant in Gujarat is the country’s single-location flat steel plant, hence attracting interest from major steel producers, with Tata Steel, JSW and Vedanta being the other potential contenders. 

Meanwhile, Tata Steel has emerged as one of the highest bidders for both Bhushan Steel Ltd and Bhushan Power & Steel Ltd, which are among the 12 stressed accounts. While Bhushan Steel owes over Rs 56,000 crore, Bhushan Power & Steel owes nearly Rs 48,000 crore. It’ll be interesting to see how the winning bidder will turnaround the company considering the huge debt and additional capital requirements to resume operations.