NCLT clears ArcelorMittal's Rs 42,000 crore bid for Essar Steel

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The Ahmedabad bench of National Company Law Tribunal on March 8 cleared the Rs 42,000-crore bid by ArcelorMittal for Essar Steel, which was referred to the insolvency courts in 2017.

Unless the Ruias, the Essar Steel promoters, plan to contest it, the order clears the way for LN Mittal to finally establish himself in his home market. The Indian market, one of the fastest growing in the global steel industry, is the only missing piece in the portfolio of the world's largest steelmaker.

The bench has additionally asked the lenders to share 15 percent of the bid with operational creditors, who had earlier this week appealed to ArcelorMittal to consider their dues too.

"We welcome today’s pronouncement by the NCLT Ahmedabad. While we will need to review the full written order once it becomes available, we hope to complete the transaction as soon as possible," ArcelorMittal said in a statement.

The court also turned down the petition from Essar Steel directors, including Prashant Ruia, who said that they should have been consulted by the Committee of Creditors before arriving at a resolution.

Few options now remain for the Ruias, for whom Essar Steel was the jewel crown. While they could challenge today's ruling and move the National Company Law Appellate Tribunal and Supreme Court, experts feel their chances of getting a favourable verdict are slim.

The Ruias, though, are not ready to throw in the towel yet.

"We continue to believe that our settlement proposal of Rs 54,389 crore is the most compelling one available to Essar Steel creditors and fulfills the IBC’s declared overriding objective of value maximisation," said a statement from an Essar spokesperson.

Adding that the Group stands by the legality of its offer to withdraw Essar Steel from insolvency proceedings under Section 12A of Insolvency and Bankruptcy Code, the spokesperson added: "We are awaiting a copy of the NCLT order, and will take a call on next steps after examining the same."

Apart from the bid amount, ArcelorMittal will also invest up to Rs 8,000 crore in Essar Steel facilities. The Essar plant in Gujarat has a capacity to produce 10 million tons a year, and ArcelorMittal plans to expand further.

Even as the LN Mittal-company gets one step closer to Essar Steel, it still has to put in place a few missing pieces. According to media reports, ArcelorMittal has offered to buy the port facility, power plant and EPC arm from the Ruias. These facilities are integral to the plant's functioning.

The saga

The Essar Steel insolvency case, the largest among the first list of bankruptcy companies referred by the RBI to NCLT, has been like a never ending saga.

It long ago breached the 270-day deadline set for solving insolvency cases, and there were many twists to the tale.

Initially, the battle was between ArcelorMittal and Numetal, the consortium led by Russia's VTB Bank, and also included Rewant Ruia, son of Ravi Ruia, one of the Essar Group founders.

Both their bids were termed ineligible by the NCLT, according to the Clause 29A of the Insolvency and Bankrupcty Code. The Clause prevents promoters of defaulting companies from bidding for stressed assets.

While ArcelorMittal's stakes in Uttam Galva Steels and KSS Petron came under the scanner, presence of Rewant Ruia in Numetal was seen as a case of 'connected person.'

While ArcelorMittal agreed to repay Uttam Galva's debts of Rs 8,000 crore, Numetal contested the order that led the Mittal company clear dues.

In October last year, the Supreme Court asked both the sides to clear dues to be eligible. This despite Rewant Ruia moving out of the Numetal consortium. Instead, JSW Steel teamed up with Numetal. Vedanta too entered the fray with an offer of Rs 35,000 crore.

Following Numetal's failure to repay debts, Essar Steel lenders chose ArcelorMittal as the preferred bidder. Though the Ruias came in with a last gap proposal of Rs 54,000 crore, the lenders refused to consider it.