Clause 29A being used to delay insolvency process: Lakshmi Mittal

The IBC, which was passed in 2016, was aimed at providing an insolvency framework that promised to cut short the time and cost in the liquidation process.

Having said that, most of the proceedings under the IBC have been stretched, with Essar Steel’s resolution process already missing its initial deadline. The auction continues to be tangled in protracted legal tussles between Numetal and ArcelorMittal.

“I understand why 29A was introduced but it does seem to be creating opportunities for others to delay the process and cause confusion in ways that are perhaps ultimately not helpful in securing strong new owners for the assets in question in a timely manner,” Mittal said.

ArcelorMittal has been blaming Numetal for intentionally delaying the process. The VTB Capital-led consortium first approached the NCLT, challenging the decision to term its bid for Essar Steel ineligible. ArcelorMittal soon followed suit with its own petition.

Both bids were termed ineligible in the first round of the auction.

While ArcelorMittal’s investment in Uttam Galva Steels - a defaulter - was seen against the Clause 29A provision, Numetal’s hurdle arose in the form of its minority shareholder Rewant Ruia, who is the son of Essar co-founder Ravi Ruia.

After the NCLT ruled that Essar Steel’s lenders should reconsider bids from Numetal and ArcelorMittal, the auction got stalled again. This time, Numetal approached the National Company Law Appellate Tribunal against ArcelorMittal being given time to rework its proposal for Essar Steel. Again, ArcelorMittal retaliated with its own petition.

At present, both ArcelorMittal and Numetal are in talks with Essar Steel’s lenders. Both companies will get back to the banks later this week on their reworked proposals.

For the first time, ArcelorMittal has revealed that it may pay off dues of Uttam Galva as a goodwill gesture to clear the eligibility test.

Despite the delays, Mittal is optimistic about the IBC’s execution.

“Ultimately I am sure it will serve its purpose but these are the first few cases so we are seeing a new law play out in real time and there may well need to be some amendments or evolution: indeed I believe these are already being discussed…Fundamentally though I remain optimistic that ultimately the code will achieve its aim,” said the billionaire entrepreneur.

India plans

Mittal has been trying to enter the manufacturing space in India, his home country, for more than a decade. But his proposed greenfield projects in Jharkhand, Odisha and Karnataka have been non-starters, because of delays in getting permissions and the global economic slowdown.

Last year, ArcelorMittal reported its first annual profit in five years as it recovered from a severe downturn in the steel industry. In 2015, the company had suffered a loss of nearly $8 billion.

While steel demand and prices have recovered this year, Mittal continues to explore ways to expand his global footprint, including in India. His home country is among the fastest growing steel markets in the world. Steel production in India is expected to increase to 300 million tons by 2030, from the present 90 million tons a year.

In Essar Steel, Mittal has an opportunity to finally make an entry into this expanding market. He is not even thinking of a plan B.

“At this stage our sole focus is on Essar Steel. We cannot comment on any longer-term plans we may have for the Indian market, other than to say it is an important and strategic market for ArcelorMittal and one where we would like to have a meaningful production presence,” he told Moneycontrol.

Earlier this week, the steel magnate’s senior colleague Brian Aranha - Executive Vice-President (Strategy, Technology, R&D), ArcelorMittal - had said that the company’s plan for Essar Steel includes increasing the latter’s capacity to 20 million tonnes a year. “We will also develop a research and development unit in Hazira if our bid is successful,” Aranha had stated. Essar Steel’s facility is located at Hazira.

ArcelorMittal has stressed on its global footprint, and research and development resources as qualities that set it apart. The company operates 56 blast furnaces around the world, and spends nearly $300 million every year on research and development, the highest for any steelmaker.

“We believe that we can add a lot of value to the Indian steel-making landscape by bringing our technology and processes and management expertise and knowhow,” said Mittal.