Will ArcelorMittal shed Uttam Galva for Essar Steel?

ArcelorMittal's plan to exit the debt-loaded Uttam Galva (UVL) triggers the speculation that the world's largest steelmaker may posture bullishly in its bid for Essar Steel. Earlier, the company had withdrawn from bidding in the insolvency proceedings for other big steel companies Bhushan Steel, Bhushan Power, and Steel and Monnet Ispat after doing due diligence. Reports say the co-promoter ArcelorMittal looks to sell its 29.1 per cent stake (41.3 million shares) in UVL at a nominal Rs 1 a share --- the share price closed at Rs 18.65 on Tuesday --- to the promoters Miglani family on Wednesday, and meet the eligibility criteria set under the Insolvency and Bankruptcy Code (IBC) to bid for the stressed steel assets.

The amendments to the IBC had restricted the errant promoters of the distressed companies from bidding for similar assets on block. The hasty move of ArcelorMittal will clear its way for Essar Steel bidding, which will be closed on February 12. Uttam Galva defaulted Rs 110 crore loans last year and in April, one of the lenders, DF Deutsche Forfait, took them to the Mumbai Bench of the National Company Law Tribunal (NCLT).

Ankit Miglani, former managing director of UVL, told Reuters ArcelorMittal's sale price would be below the market value. ArcelorMittal chairman LN Mittal has long been planning to build a steel plant in the country but failed to do it because of the regulatory hassles. Essar's 10 million tonne (MT) steel plant in Hazira, Gujarat, will fit into its plan to create a sizable footprint in the Rs 3.15 lakh crore Indian steel market. ArcelorMittal also formed a joint venture with SAIL in 2015 for manufacturing autograde steel in the country. According to the World Steel Association, steel production in India is projected to grow at 7.1 per cent, the highest rate among the top 10 steel-using countries, in 2018.

Bids for troubled steelmaker Bhushan Steel is expected to open any time soon, in which JSW Steel, Tata Steel and a consortium of 400 Bhushan employees along with a Singapore-based private fund are in the race. JSW Steel- AION Capital consortium was the only bidder for Monnet Ispat, which is in the insolvency proceedings.