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SBI-led consortium rejects Numetal, ArcelorMittal's bid for Essar Steel

Numetal and ArcelorMittal, the only two bidders for Essar Steel, were found to be ineligible under Section 29 A of the amended IBC which bars promoters of defaulting firms and also related parties from buying out stressed assets being put up for auction to recover bad loans of banks.

Mail Today Bureau        Last Updated: March 22, 2018  | 09:50 IST
SBI-led consortium rejects Numetal, ArcelorMittal's bid for Essar Steel

The SBI-led consortium of banks on Wednesday rejected the bids by Numetal and ArcelorMittal for Essar Steel as they were found to be ineligible under the provisions of the amended Insolvency and Bankruptcy Code (IBC).

Numetal and ArcelorMittal, the only two bidders for Essar Steel, were found to be ineligible under Section 29 A of the amended IBC which bars promoters of defaulting firms and also related parties from buying out stressed assets being put up for auction to recover bad loans of banks.

The decision to reject both the bids was taken at a meeting of the committee of creditors (CoC) of Essar Steel which has decided to allow a second round of bidding for the 10-million tonne-asset at Hazira in Gujarat.

Essar Steel has defaulted on the payment of a staggering Rs 45,000 crore in loans to the SBI led consortium of lenders. The two companies submitted their bids on February 12 but have since been slugging it out with each other over questions about their eligibility to participate in the auction.

Numetal's bid was rejected as one of the promoters of the special purpose vehicle is Rewant Ruia, the son of an Essar Group promoter Ravi Ruia, who is one of the original promoters of Essar Steel.

Even though the Luxembourgbased ArcelorMittal has teamed up with Nippon Steel & Sumitomo Metal Corp to bid for Essar Steel, it has been found ineligible as it has a joint venture with Uttam Galva, which has defaulted on loan payments and the case is pending with NCLT for resolution.

Bankers, however, said if these companies delinked their connection from the promoters or standardise their loans they can compete again in the second round of bidding.

The lenders have set an April 2 deadline for the second round of bidding for Essar Steel that owes over Rs 45,000 crore to over 30 banks and other creditors. However, the response to the bidding round has been tepid as big players such as Tata Steel, Sajjan Jindal-led JSW Steel and Anil Aggrawal-led Vedanta have kept away from bidding for Essar Steel.

The shareholders of the Mauritius-based Numetal, a special purpose vehicle that focuses on steel and infrastructure space along with manufacturing, are VTB Capital, the PE arm of the Russian stateowned lender VTB Bank and Aurora Trusts in which Rewant Ruia owns 25 per cent.

The other promoters include the Russian steel and engineering major TyazhPromExports (TPE) and Indo International, a Dubai-based metals trading firm promoted by an NRI. VTB Capital owns majority in Numetal.

Bids of these firms were evaluated by resolution professional Satish Kumar Gupta, along with risk advisory Grant Thornton and law firm Cyril Amarchand Mangaldas. The rejection comes a day after Numetal moved the Ahmedabad NCLT seeking to declare its eligibility, as it apprehended that the full facts it submitted to the RP were not assessed properly.

Numetal is now expected to ask Rewant Ruia to exit the firm. But he was quick to point out that Rewant did not have any say in the management of Numetal or enjoyed a board position. Both Numetal and Arcelor-Mittal had threatened to challenge NCLT and RP in higher courts if their bids were rejected.

The government, on its part, had recently hinted that it was amenable to make more changes to Section 29 of the IBC Act to redefine related parties.

 

 

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