Sources told Moneycontrol the exchanges have declassified ArcelorMittal as promoter of Uttam Galva.
ArcelorMittal has got approval from exchanges to change its 'promoter' status in Uttam Galva Steels, giving it a huge boost ahead of the second round bidding for Essar Steel.
Sources confirmed that exchanges have declassified ArcelorMittal as promoter of Uttam Galva.
“ArcelorMittal moved to exchanges and SEBI on March 9 to be declassified as a promoter in Uttam Galva. The NSE has approved the change on March 22 while BSE approved it on Friday,” a source told Moneycontrol.
"Reclassification of ArcelorMittal BV as a promoter of Uttam Galva was a matter of procedure and Stock Exchanges do look if there was any shareholding or special rights before providing approval." said Sumit Agrawal of Suvan Law Advisors who representing ArcelorMittal.
The eligibility hurdle resolved
ArcelorMittal had bought 29 percent stake in Uttam Galva in 2010, venturing into the Indian market for the first time. But the investment came under scrutiny when the world’s largest steelmaker expressed interest in buying Essar Steel. The Essar Group company was referred to the National Company Law Tribunal after accumulating debts of nearly Rs 50,000 crore.
An amendment in the Insolvency and Bankruptcy Code (IBC) prevented promoters of defaulting companies from bidding for a stressed asset. Despite ArcelorMittal’s contention that it didn’t have a management role in the running of Uttam Galva – which had defaulted on loan repayments – the company was under pressure.
Consequently on January 31, Uttam Galva told BSE it was buying back the 29 percent stake from ArcelorMittal. But the stake sale was not enough.
ArcelorMittal and Numetal submitted bids for Essar Steel on February 12. More than a month later, and after several rounds of deliberations, both the bids were found to be ineligible in a meeting between the resolution professional (RP) and Essar Steel's Committee of Creditors (CoC).
The resolution professional oversees the auction, and CoC consists of the company's lenders.
Clearly, despite having sold the stake in Uttam Galva, it mattered that ArcelorMittal was a 'promoter' when the company owned by the Miglani family defaulted.
If SEBI and the two exchanges do accept ArcelorMittal’s request, it will strengthen the steelmaker’s case as the auction of Essar Steel enters a second round of bidding.
The deadline for submitting bids in the second round is April 2.
Apart from ArcelorMittal and Numetal – both of whom can bid again – other companies in the fray include Tata Steel, Vedanta Resources and JSW Steel.