ArcelorMittal has entered into a joint venture pact with Nippon Steel & Sumitomo Metal Corporation to jointly acquire the assets of Essar Steel. The company's arm ArcelorMittal India has submitted a resolution plan for Essar Steel on February 12. CNBC-TV18’s Anshu Sharma caught up with Brian Aranha, the Executive Vice President, ArcelorMittal to get more insights into the bid.
Below is the verbatim transcript of the interview.
Q: What brings you to India and what are you betting big on?
A: In terms of getting into India, we had some significant plans for Greenfield facility back in 2008, but the economy went awfully negative after that. Since then it has been very difficult to justify the capital cost of doing a Greenfield facility in India. So, we have been looking for various alternatives and now we find some assets have come up for sale. So, it is an opportunity for us to take advantage of that.
Q: Which are the assets that you have bid for?
A: We have put in a bid for Essar; it is our main focus in terms of the distressed assets that we have looked at. So, we are focused on that one and hoping it will turn out well for us.
Q: ArcelorMittal is known for turnaround of the stressed assets. So how much time do you think you will take to turnaround the Essar Steel’s Hazira plant?
A: I think turning it around is probably one way of putting it but to take it nearer to its nameplate potential is probably a better way to put it. It has been running in a near bankruptcy mode for quite some period of time. So, the previous management was constrained in what they could do. We will be free of those constraints and can probably within a years’ time show significant progress and within two years much more progress than the current level of performance of the plant.
Q: ArcelorMittal is known for world class facilities. So what are the changes that we can expect if you win the bid for the Essar Steel plant and if I can also ask you what equity value do you see in Essar Steel plant?
A: First of all, the changes that we will make in the plant are something that I am not at liberty to discuss because it is part of the resolution plan we have submitted and we are subject to some confidentiality clauses in that process. So, hopefully you let me respect those.
With respect to what we see as value, we are a global company and India is a growing market. So, it is one of the markets that is probably going to have the most of rapid growth in the next few years and it is clearly of interest to us to be participating in the growing market. We are producing 95 million tonne of steel and a number of countries around the globe and this was one place where we did not have a good production facility already. So, it fits into our strategy of being a global player and taking a major role in growing economies where we can.
Q: What do you make of the insolvency and bankruptcy code of India and do you expect any delay in the process?
A: Our view is that the provision is there to prevent a willful defaulter from participating in this process and certainly ArcelorMittal is not a willful defaulter; that is one thing we can say. With respect to how the legal authorities will view our position, I think that is still to be determined. We think it is very firm that we do not have any issues in terms of our compliance with the requirements of 29A. We are feeling pretty confident that from our standpoint it is alright. With respect to other people, we are not going to make any comments. Our approach is to put our credentials and our case forward and win purely on the merits of what we say.
Q: There is intense competition with regards to Essar Steel plants, especially there are new controversy coming out every day, whether it is ArcelorMittal's stake in Uttam Galva or disqualification of new metal as it is related to the promoters. How do you see all of this?
A: I can speak from our standpoint, we do not expect to be disqualified and we are not really making any comments on other people’s bids and their position because it is up to the resolution professionals and their advisors to make those decisions. So we just put our case forward and let them decide.
Q: What is the timeline that you are looking for, these stressed assets sale out?
A: I think the final timeline for the process is up to the end of April. So the resolution professionals I think in the meantime will run what they have to do to make sure that the decision is complete and the transaction is completed by that date.
More to come..
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