Advantage Numetal in Essar race

Calcutta: Numetal appears to be leading the race to grab the prized Essar Steel asset ahead of rival ArcelorMittal, following an order of the National Company Law Appellate Tribunal on Friday .

The NCLAT has held Numetal, a consortium led by two Russian government-owned entities, as eligible in the second round, while asking ArcelorMittal India Pvt Ltd (AMIPL) to pay the overdue amounts in respect of two NPA accounts by September 11 to be eligible.

The appellate tribunal order also paved the way for bidders to better their existing offers by leaving scope for negotiation with the committee of creditors of Essar Steel.

Essar Steel, promoted by Ruia brothers, Shashi and Ravi, owes banks close to Rs 49,343 crore by way of principal, interest and penalties and another Rs 4,970 crore to operational creditors.

The State Bank of India, the lead lender, welcomed the decision and said it will withdraw the process of sale of debt of Essar Steel India and proceed according to the NCLAT order.

Later in the day, SBI chairman Rajneesh Kumar was quoted saying that the bank expected the haircut on the loan to be minimal as the NCLAT had left the scope for negotiation open. Given that the steel sector has turned around globally, bidders are expected to be aggressive.

The responses from the two chief protagonists were predictably different in tone.

"This vindicates Numetal's conviction that they are an eligible bidder and have given a compelling offer to the creditors for Essar Steel's resolution plan under IBC," Numetal said after its second round of bid was held valid.

"We note today's NCLAT judgment and await the full order, which we will review before determining our next steps," AMIPL said.

Story so far

NuMetal and ArcelorMittal had in February submitted separate bids to take over Essar Steel. The CoC, however, disqualified both bids saying their promoters were tied to companies that were bank loan defaulters and so ineligible. Both NuMetal and Essar Steel challenged the disqualification in the Ahmedabad-bench of the NCLT, which did not give any relief to the bidders but asked the CoC to take another look at the bids before disqualifying them. The NCLT order was challenged by both the bidders in the NCLAT.

Numetal case

The bench comprising Sudhansu Jyoti Mukhopadhyaya and Bansi Lal Mehta accepted the solution provided by Numetal by dropping Rewant Ruia before filing the second round of bid on March 29.

The restructured consortium had only three shareholders - Crinium Bay, a wholly owned subsidiary of VTV Bank of Russia (40 per cent), Indo International Trading FZCO (34.1 per cent) and TPE, a subsidiary of Rostec (25.9 per cent).

The court held that all the three shareholders were not falling foul of 29(A) of the Insolvency & Bankruptcy Code that deems certain companies ineligible from being a resolution applicant on various counts, most significantly, for holding non performing assets for more than a year.

In the first round, Aurora Enterprise, a company linked to Ravi Ruia's son Rewant, held a 25 per cent share. The court had declared AEL a 'related party' as Rewant was the son of Ravi, promoter of Essar.

AMIPL logic

The court did not accept the solution offered by AM when it sold its shares in two NPA firms, Uttam Galva Steels and KSS Petron, saying the only cure available under the IBC was paying up the dues.

It held that AMIPL fell foul of 29A on account of its shareholding in UGSL and KSS Petron. AM had offered to pay Rs 7,000 crore but did not actually pay it to the lenders. It, however, did not agree with the argument made by Numetal that AMIPL was not eligible to pay at all.

Looking ahead

The second round of bid allows JSW Steel to remain in the hunt as it holds a 25 per cent stake in a step-down subsidiary of Numetal, which will execute the resolution plan.

It also gives a scope to Vedanta to up the bid. As of now, Numetal has made a cash offer of Rs 37,000 crore for Essar. AMIPL's offer is said to be in the region of Rs 26,000 crore on a like-to-like basis.