Numetal gets ahead in race for Essar Steel

The National Company Law Appellate Tribunal (NCLAT) has ruled that the second bid by Russia’s VTB Capital-backed Numetal for Essar Steel is valid. This ruling on Friday came even as it asked the Lakshmi Mittal-promoted ArcelorMittal to clear the dues of Uttam Galva and KSS Petron by September 11 to consider its bid for Essar Steel to be eligible. Essar Steel has been under the corporate insolvency resolution process as prescribed under the Insolvency and Bankruptcy Code (IBC), since August 2017.

The two-judge NCLAT bench headed by Justice S J Mukhopadhyay asked the committee of creditors (CoC) to consider both the plans if ArcelorMittal completes its payments. According to sources, the dues of Uttam Galva and KSS Petron are slightly more than Rs 7,000 crore. ArcelorMittal had a minority stake in both the companies. In Uttam Galva, ArcelorMittal sold a 29% stake in February before the CoC opened the first round of bids. Lakshmi Mittal also sold his 33% stake in KazStroyService (KSS) in February. KSS Petron is a 100% subsidiary of KSS.

“This [NCLAT’s verdict] vindicates Numetal’s conviction that they are an eligible bidder and has given a compelling offer to the creditors for Essar Steel’s resolution plan under IBC. Numetal welcomes the judgment of the NCLAT bench and re-iterates its faith in the judicial system of the country,” a spokesperson for Numetal said.

An ArcelorMittal spokesperson said that the company had noted the judgment but were awaiting the full order, after which it would decide on the next steps.

In the first round of bidding for Essar Steel—which has the capacity to manufacture around 10 million tonnes of flat steel products and owes its creditors Rs 49,000 crore—Numetal was disqualified on the grounds that Rewant Ruia, son of Essar Steel promoter Ravi Ruia, had a 25% stake in the firm through a trust called Aurora Enterprises. The disqualification was under Section 29A of the IBC code. VTB holds a 40% stake in Numetal.

VTB and promoters of the Essar group have had a working relationship in the past. In 2014, Russia’s second largest bank lent money to Essar’s promoters as they de-listed Essar Oil, which was eventually sold for $13 billion to Rosneft, Trafigura and UCP.

In March, the CoC decided to call for a second round of bids. This time, Rewant Ruia exited the Numetal consortium and sold his stake to the other two members of the consortium—Indo International Trading and Tyazhpromexport (TPE). During the second round of bids, besides VTB holding 40% in Numetal, 34.1% was with Indo International trading, with the balance stake of 25.9% being with TPE. The second round of bids also saw a bid by Anil Agarwal’s Vedanta Resources. All three bids have remained sealed since the eligibility of Numetal was challenged by ArcelorMittal and vice-versa at the NCLAT.

According to the NCLAT’s judgment, all three bids will now be considered if ArcelorMittal clears its dues. “If such amount is deposited in… both non-performing accounts of ‘Uttam Galva’ and ‘KSS Petron’ within time aforesaid and is informed, the ‘Committee of Creditors’ will consider the ‘Resolution Plan’ submitted by ‘AM India Ltd’ [ArcelorMittal India Ltd] along with other ‘Resolution Plans’, including the ‘Resolution Plan’ submitted by the ‘Numetal Ltd.’ on 29th March, 2018, and if so necessary, may negotiate with the ‘Resolution Applicant(s)’ [Arcleor Mittal, Numetal and Vedanta Resources],” the judgment stated.

The clock will also start ticking on the resolution process for Essar Steel. Sources in the know said there are about 30-60 days left of the 270-day period prescribed by the IBC before a company goes into liquidation. If either of the parties challenges the NCLAT order, the saga of Essar Steel’s debt resolution will stretch further.