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It has been a tough year for India’s fourth-richest man as he struggled to return to his roots.
When Lakshmi Mittal, 68, left India for a vacation through Asia over four decades ago, he didn’t plan to stay in Indonesia and lay the foundation for a steel empire that spans the globe and generated $5 billion in profits last year. Yet that’s what he did, even as a string of efforts to establish himself in India’s steel market failed — until now.
Mittal’s global giant ArcelorMittal is finally nearing the end of a year-long battle to break into India with the $5.9 billion-acquisition of Essar Steel India Ltd. The Indian steelmaker was put on the block after its lenders approached the court to recover about $7 billion in dues.
The forced sale of the 10 million metric tons a year mill has hit numerous roadblocks, including rules that compelled Mittal to shell out an extra $1 billion to clear the dues of two firms where he held some stake, and to reportedly sell his holdings in one of them for ₹1--a-share.
Bankruptry
Perhaps the biggest hurdle was posed by the Essar Group’s Ruia brothers, who lost control of the mill after a regulator pushed it into bankruptcy court. Challenges from the Essar Group, rival bidders and some creditors have seen ArcelorMittal make numerous trips to court since an initial bid in February 2018 — dwarfing its five-month long campaign for Arcelor SA, in what was the industry’s biggest merger. “We have acquired lots of companies around the world. For the first time, we have been sued for acquiring a company,” said Aditya Mittal, the company’s Chief Financial Officer, and Lakshmi Mittal’s 43-year-old son. in a BloombergQuint interview in January.
Court warning
The legal wrangling landed in the Supreme Court last year, setting precedents for India’s two-year-old bankruptcy law. The drama also resounded a warning to other founders, who till recently were accustomed to an ineffectual court system and were walking away from debts without serious consequences.
Essar Steel’s capacity will immediately make ArcelorMittal the fourth-biggest player in a nation where the administration plans to invest trillions of rupees in infrastructure. The government has a mandate to use locally-produced steel for projects under the ‘Make in India’ campaign and has curbed overseas inflows with minimum import price limits and anti-dumping taxes, in the past.
ArcelorMittal is partnering with Nippon Steel & Sumitomo Metal Corp for the purchase, though it will hold a controlling stake.
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