The world’s largest steelmaker, ArcelorMittal, has been selected as the H1 or preferred bidder by the Committee of Creditors (CoC) of Essar Steel. In the coming weeks, the CoC will enter into negotiations with ArcelorMittal for the final amount that would have to be paid.
“ArcelorMittal confirms it has been informed by the CoC for Essar Steel India Limited that it has been evaluated to be the H1 Resolution Applicant (the preferred bidder) in the corporate insolvency resolution process for Essar Steel. The company will now enter into further final negotiations with the CoC,” a statement from the Luxembourg-headquartered company said on Friday evening.
If ArcelorMittal succeeds in acquiring Essar Steel, it would be the culmination of a decade-long dream for the company’s promoter, Lakshmi N. Mittal, to operate a steel plant in the country of his birth. His earlier attempts at setting up greenfield steel plants in Jharkhand and Karnataka since 2005 had been unsuccessful due to land acquisition issues and the inability to get mining rights.
The selection as the preferred bidder came just two days after ArcelorMittal had paid ₹7,469 crore to the financial creditors of Uttam Galva and KSS Petron and cleared the dues of the two companies. The payment was made to comply with a Supreme Court order dated October 4. The court had ruled that ArcelorMittal Netherlands’ 29% stake in Uttam Galva and Lakshmi Mittal’s 33% stake in KSS Petron’s parent KazStroyService, was sold only after the corporate insolvency resolution process for Essar Steel had begun and it was done to circumvent Section 29 (A) of the Insolvency and Bankruptcy Code (IBC), which prevents promoters of bankrupt companies from being eligible to bid for other bankrupt companies. The apex court ruled that merely selling the stake during the resolution process for Essar Steel did not make ArcelorMittal eligible, and that it would be required to clear the dues of Uttam Galva and KSS Petron, which were classified as bad loans.
Essar Steel’s 10 million tonne per annum integrated steel plant on the coast of Gujarat produces high quality flat steel products used for everything from automobiles to warships. It was the first asset to go under the corporate insolvency resolution process (CIRP) as prescribed by the IBC, last July and it remains the largest asset available under the Code in India. Attempts by the Essar Group to acquire the company again under the IBC process led to the government introducing the Section 29 (A) amendment last November.