ArcelorMittal may pay off Uttam Galva's dues as 'goodwill gesture'

While reiterating that its bid for Essar Steel is eligible, ArcelorMittal has for the first time revealed that it may consider paying off the dues of Uttam Galva Steels as a ‘goodwill gesture’. The lenders, which make up the Committee of Creditors (CoC), met representatives of ArcelorMittal and Numetal on Wednesday. The two bidders were responding to queries on their eligibility.

"It is believed that any repayment discussions on any outstanding dues by ArcelorMittal would be a gesture of goodwill as the company strongly insists that its offer is eligible," Brian Aranha, Executive Vice-President (Strategy, Technology, R&D), ArcelorMittal told Moneycontrol.

Aranha was talking to journalists at ArcelorMittal’s R&D facility in Montataire, France.

Earlier, lenders had objected to ArcelorMittal’s investment in Uttam Galva, which had defaulted on loan repayments. The loans amount to Rs 8,000 crore.

Bids from the two companies were termed ineligible in the first round of bidding for Essar Steel. While ArcelorMittal’s investments in Uttam Galva Steels - a defaulter – was a hurdle, in the case of Numetal, the issue revolves around the connection between its minority shareholder Rewant Ruia and the founders of Essar Steel.

The responses from the two bidders could well decide the future course of auction, which has already missed its original deadline. Lenders have the option to call for fresh bids if the eligibility issue continues to cloud submissions from ArcelorMittal and Numetal.

The world’s largest steelmaker continues to stress about its non-involvement in Uttam Galva Steels in which it had bought into in 2010. “We had written off the investment of $150 million in 2015. We have no further interest in the investment,” Aranha said.

ArcelorMittal had intended to use Uttam Galva’s facility to process raw steel from its planned greenfield projects in Jharkhand, Odisha and Karnataka. But when these projects got stuck due to delays in getting permissions and on account of the global economic slowdown its interest in Uttam Galva waned.

Aranha added that the company had started the process of declassifying itself as Uttam Galva promoter before submitting its bid for Essar Steel. But an ‘administrative delay’ meant that the declassification came through after the bids were submitted.

ArcelorMittal had also sold back its stake in Uttam Galva to its promoters to clear its bid under the Insolvency & Bankruptcy Code (IBC). Clause 29A of the code prevents promoters of the defaulting company from bidding for stressed assets.

While ArcelorMittal is believed to have bid Rs 35,000 crore for Essar Steel, the same for Numetal stands at Rs 19,000 crore. According to bid evaluation norms, 70 percent weightage will be given to financial terms. The rest will be for the resolution plan.

“If you stack up the qualifications, we don’t have an equal in the game,” Aranha said, stressing on ArcelorMittal’s 56 blast furnaces around the world that churned out 95 million tonne of steel last year. “But how can a bank describe itself in similar terms,” he questioned, pointing to VTB Bank, Numetal’s largest shareholder.

ArcelorMittal’s plan for Essar Steel includes increasing the latter’s capacity to 20 mtpa. “We will also develop a R&D unit in Hazira if our bid is successful,” Aranha stated. Essar Steel’s facility is located in Hazira.