Essar Steel, once the flagship company of Shashi Ruia and Ravi Ruia’s Essar Group, has become a test case for India’s new bankruptcy code. In a span of less than a year, the insolvency proceedings against the company have witnessed a court case, a change in law, and, two keen bidders — ArcelorMittal and Numetal Ltd.

Essar Steel was one of the dozen companies that the Reserve bank of India had initiated bankruptcy proceedings against, last year, which were then challenged by the distressed company.

The Ruias, however, lost their plea against halting the insolvency proceedings in August, but the promoter family of the Essar Group started to chalk up plans to bid for the company.

At the time, they were allowed to do so. Owners of bankrupt companies could still make a bid for the same companies that they bled dry. But there was widespread criticism of this ‘loophole’, leading to an amendment being brought in through an ordinance. The amendment, which introduced Section 29A, bars wilful defaulters, defaulting promoters and related persons from bidding under the insolvency process.

Now, the amendment has put a question mark on the only two bids that were received for Essar Steel. One from ArcelorMittal and the other from Numetal Ltd.

Numetal Ltd was registered as a company in Mauritius barely six months ago. It is a consortium of investors led by Russia’s VTB Bank PJSC. Rewant Ruia, the younger son of Ravi Ruia is also a stakeholder in the firm. That has put a question mark on Numetal’s eligibility to bid for Essar Steel under Section 29A of the Insolvency and Bankruptcy Code (IBC). However, the company maintains that Rewant Ruia does not own any stake in the Essar Group and therefore Numetal’s eligibility should not be affected.

On Friday, Numetal even distanced itself from Rewant Ruia by sharing a list of the other investors in the company. Numetal’s largest shareholder is Russia’s VTB Bank PJSC, which has assets in excess of $215 billion. The company also funded the delisting of Essar Oil and then the acquisition of Essar Oil by Rosneft, Trafigura and United Capital Partners.

The other shareholders include Tyazhpromexport JSC (TPE), a Russian Engineering firm, which has been in India for 60 years, and Indo International Trading, a commodity trading firm based in the Jebel Ali Free Trade Zone in the United Arab Emirates. The final shareholder named by the company is Aurora Enterprises Ltd. Details on this company were not available.

Numetal also said that it has submitted a ‘detailed turnaround plan to address operational and financial issues’.

“In order to ensure a smooth transition and provide a catalyst for change in operational management and improvement program at Essar Steel, Numetal has assembled a team of senior professionals with significant experience and background in the industrial sector of operating large integrated steel plants in India to ensure that Essar Steel can become one of the highest performers in the Indian steel industry,” the company said in a statement.

C S Verma, former chairman of the public sector steel maker SAIL, has also joined Numetal as chief executive officer. “We have a plan and support to be able to make a meaningful contribution to the Indian steel sector, if we are chosen as the applicant to implement the turnaround strategy, summarised in our plan to the resolution professional.”

Numetal sent out the media statement about the confirmation and validity of their bid despite media reports claiming both Numetal’s and ArcelorMittal’s bids will be disqualified.

Meanwhile, Lakshmi Mittal, CEO of ArcelorMittal went to meet the finance minister, Arun Jaitley. The Luxembourg-based ArcelorMittal has been waiting to enter India in a meaningful manner since 2006, when the India-born steel-magnate’s Mittal Steel bought Arcelor for about $33 billion. ArcelorMittal’s India exposure has been limited to minority stakes in companies like Uttam Galva Steels, another company that was declared a non-performing asset. That association is coming to haunt Lakshmi Mittal’s latest bid to enter India.

According to a steel industry consultant who did not wish to be named, “ArcelorMittal will either have to repay the dues of Uttam Galva or find a way to convince the government to let them exit the company.”

Mittal appeared confident after the meeting with the finance minister. “We have put in a very important and well-planned bid for Essar Steel and we think that we can create value in this company with our experience on a global basis. Whatever we have heard, no bids have been rejected yet. Resolution professionals are studying the bids and let their decision come out,” he told reporters.

For Mittal, who runs the world’s largest steelmaker, Essar Steel offers a chance to complete that decade old dream to own an integrated steel plant in India.

Essar Steel owes Rs 49,212 crore to 34 banks, financial institutions, trusts and other corporate entities, Rs 2,581 crore of thousands of operational creditors and Rs 18 crore to employees, according to data from the company’s website. Yet, it has a 10 million tonne per annum state-of-the-art steel manufacturing facility in the west coast port-town of Hazira in Gujarat. That itself can add roughly 10% to ArcelorMittal’s existing global production capacity of 114 million tonne.

The facility produces flat steel products for naval equipment, for automobiles and for other consumer goods industries, for both domestic and export markets. It is one of the largest single-location integrated steel factories in the country that gives it access to tailor-made allied infrastructure. Which is why according to those in the know of the developments, the liquidation value or the least recoverable value of Essar Steel is determined to be Rs 20,000 crore, or nearly half of the amount owed to financial creditors.

In 2015-16, when domestic steel prices were under pressure due to cheaper steel imports when demand was low, Essar Steel posted a net revenue was Rs 15,558 crore and net loss was Rs 5,795 crore. Whereas in 2014-15, it clocked a net profit of Rs 466.5 crore, on revenue of Rs 15,479.5 crore. The company is unlisted and its financials are only available till 2015-16.

India Ratings & Research (Ind-Ra) believes that the tide will change for the steel sector in 2018-19. The ratings agency revised its outlook to stable for the 2018-19 financial year as compared to negative in the previous financial year. “Ind-Ra expects industry participants to exhibit an improvement in operational and financial performance, backed by steady sales realisations and margins, supported by an improved demand-supply balance,” the ratings agency said in a recent report.

“The agency has also revised its outlook on rated steel entities to stable for FY19 from negative in FY18, in view of higher cash flow generation and balance sheet deleveraging, supported by healthy margins, moderate capex requirements,” the report added.

What we know so far is that ArcelorMittal and Numetal are both interested in Essar Steel and the company itself has a future in an improving industry environment for iron & steel. What we don’t know is whether their past of being defaulting promoters will come back to haunt them, and get their bids disqualified. Either way, the answer to that, and whether the IBC has helped script a tale of great revival in Essar Steel, will be out soon.

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