Exclusive: Numetal, ArcelorMittal bids for Essar Steel rejected

Bids by Numetal and ArcelorMittal for Essar Steel have been rejected by the lenders after failing to clear the eligibility test.

The decision was taken at a meeting on Wednesday between the resolution professional and Essar Steel's Committee of Creditors, which consists of the lenders.

"Both have been declared ineligible for the bid and a fresh round of bidding has been called. The second round of bids will have to be submitted mostly by April 2," said sources.

Numetal and ArcelorMittal had submitted their bids for the stressed steelmaker on February 12.

Sources also said more than five  buyers had expressed interest in the first round of bidding, including both Numetal and ArcelorMittal. All of them will be allowed to bid in the second round as well.

These include Tata Steel, Vedanta Group, SSG Capital, AION and Nippon Steel.

"A voting will be done among the lenders later this week or early next to decide on allowing bids from companies who hadn't shows interest earlier," said a source.

Separately, Moneycontrol learned that JSW Steel will also be interested in putting in a bid in the second round. "If the lenders decide against letting new companies joining the fray, then JSW Steel may join a consortium," said sources.

The test

Ever since the bids by ArcelorMittal and Numetal were first submitted, there have been doubts about their eligibility. This was because of an amendment in the Insolvency and Bankruptcy Code (IBC), which prevented a promoter of a defaulting company from bidding for stressed assets.

ArcelorMittal had invested in Uttam Galva, which had defaulted on loan repayments. Though the Lakshmi Mittal later exited from the company, doubts persisted.

Similarly, Numetal's minority shareholder Rewant Ruia was termed a "connected person," as his father Ravi Ruia is one of the co-founders of Essar Steel. Numetal is headed by Russia's VTB Capital, and TPE, an engineering major. Indo International Trading is a minority shareholder in Numetal.

Essar steel company was referred to the National Company Law Tribunal last year after accumulating debt of nearly Rs 50,000 crore.

NCLT move

Earlier in the day on Wednesday, Numetal announced that it has moved the Ahmedabad bench of NCLT seeking a declaration that its bid for the stressed steel company is eligible.

"Numetal apprehends that full facts submitted by Numetal for determination of its eligibility to submit a Resolution Plan have not been appropriately assessed," the company said in a press release.

The next hearing is on April 4.

A spokesperson of ArcelorMittal said the company is yet to hear from the resolution professional on the decision.