Russia’s VTB Capital says it can bid more for Essar Steel

Russian private equity major VTB Capital has said it is willing to increase its price for India’s Essar Steel if it wins the bid for the stressed asset, whose auction is being overseen by a resolution professional.

VTB Capital has formed a joint venture — Numetal — to acquire Essar’s stressed steel assets. ArcelorMittal is the other bidder. The resolution professional and the committee of lenders are likely to meet on Monday to decide on the bids.

Makram Abboud, Vice-Chairman International, VTB Capital, said: “We are committed to winning this bid for Essar Steel. We are going to be flexible on many aspects because we believe that this company has huge potential for growth if its given the right support.”

While ArcelorMittal has partnered with Nippon Steel, Numetal is backed by VTB Capital, Tyazhpromexport JSC (a Russian metal engineering firm) and Rewant Ruia, the son of Essar Group’s promoter, Ravi Ruia.

Rewant’s presence in the JV has raised questions as a newly-inserted rule disqualifies a resolution plan bid if it has an account that has ever been classified as a non-performing asset. The Ruias were promoters of Essar Steel when it turned an NPA.

While Abboud said Rewant could be asked to step aside if required, he believed that the move to have the Ruia scion on board was well thought out. “I have three different law firms telling me there is no problem. He is there not because we know him, but [because] we believe he can deliver,” Abboud said, adding that the Ruias will have no say in the company’s management. “We will put [in place] a new management and board. Rewant (Ruia) will have a stake,” Abboud said.

However, the bids could hit a legal hurdle with Numetal and ArcelorMittal questioning each other’s eligibility. While Numetal has been questioned due to Rewant’s presence in the JV, ArcelorMittal’s bid could be challenged due to its earlier stake in bankrupt company Uttam Galva.

Meanwhile, Numetal has roped in SAIL’s former chairman, CS Verma, to manage the company. Vermasaid once the bid is won, the priority will be to complete projects that have been stuck for want of funds. “We plan to ramp up production to a maximum level of 9.7 million tonne in 6-8 months. We have to make a separate investment in mines. If we do not develop them, it will taken back. We have to complete a coke oven plant at Hazira and [take up] expansion of a pellet plant. Once these are done, there is scope for a brownfield expansion. The capex cannot be revealed as it is part of the overall bid.”

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