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In rapid developments on Monday, three steel giants joined the bidding for Essar Steel.
While JSW Steel moved to join bidder Numetal, a consortium promoted by Russia’s VTB Bank, ArcelorMittal submitted fresh proposals, and Vedanta also threw its hat into the ring, making it a three-way fight.
Essar Steel’s lenders had called for rebids after the initial proposals by Numetal and ArcelorMittal were found to be non-compliant with the Insolvency Bankruptcy Code, 2016. Monday was the last day to submit fresh bids.
JSW Steel will buy out the 25 per cent stake of Rewant Ruia — son of Essar Steel promoter Ravi Ruia — in the VTB Bank-led consortium. Numetal’s links to the Ruias was the reason for the rejection of its bid in the first round. Earlier, JSW had attempted to bid on its own, but this was rejected by the Committee of Creditors on the ground that the fresh round of bidding was open to only those entities that had submitted an expression of interest in the first round.
ArcelorMittal, the world’s largest steel producer, has severed links with debt-laden Uttam Galva so as to comply with the insolvency rules.
War of words
ArcelorMittal said JSW Steel’s strategy is clearly a defensive move on the part of the Sajjan Jindal-backed company to keep out competition. “India needs new players to achieve its steel production target of 300 million tonnes,” ArcelorMittal said.
A source close to ArcelorMittal said JSW would have over 90 per cent market share of steel-making capacity in western India, which can be termed a monopoly.
“JSW initially said it would not bid for Essar due to its strong presence in western and southern India and did not submit an Expression of Interest. Of course, it may be thinking about a deal with the Ruias in the future,” the source said.
Seshagiri Rao, Joint Managing Director, JSW Steel, however said that it was not right to term JSW a monopoly player as its 18 mtpa capacity is only a fraction of India’s total production of 128 mtpa.
ArcelorMittal has also taken steps to ensure that its earlier stake in debt-laden Uttam Galva does not inhibit its plans to acquire Essar Steel. Earlier, a minority shareholder, Sulbha Naik, had claimed that ArcelorMittal had stood as guarantor for Uttam Galva to raise ₹1,400 crore in 2011 and had assured the consortium of lenders led by SBI that it would not sell Uttam Galva shares without the lenders’ approval. Naik said ArcelorMittal had not kept its word and sold its shares in order to make it eligible to bid for Essar.
ArcelorMittal has rejected the allegations.
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