Fresh Essar Steel bid open only to initial bidders

The committee of creditors (CoC) of Essar Steel, which met on Tuesday to finalise on bankrupt company's fate, has decided to allow the five original bidders to put in fresh applications to take over the debt-laden company.

ArcelorMittal and Numetal, an SPV floated by Russia's VTB Capital and Rewant Ruia, will be given a new chance to bid again, banking sources said. The State Bank of India-led consortium of lenders on Tuesday rejected the bids of ArcelorMittal and Numetal as they failed to meet the eligibility criteria under the Insolvency and Bankruptcy Code 2016 (IBC).

The fresh bids will have to be submitted by April 2, banking sources said. The companies that will be allowed to bid in the new round are Numetal, ArcelorMittal, Nippon Steel, Vedanta and Tata Steel.

"All the original bidders have been allowed to bid again. No new bidder will be allowed to come in at this stage as this will mean that we will have to run the entire process once again," a source familiar with the development said.

Most of the bidders in the first round had pulled out, leaving only Numetal and ArcelorMittal in the race for acquiring Essar Steel, which owes Rs 37,280 crore to the banks.

Numetal failed the test as it had Rewant Ruia, son of Ravi Ruia, as one of the partners in the consortium. ArcelorMittal, on the other hand, did not qualify as it had a stake in Uttam Galva, a loan defaulting company.

"It was only fair that we reject both the bids as they failed to be eligible. We will now call for fresh bids," a senior banker said.

"L N Mittal, chairman and CEO of ArcelorMittal, has sold off his shareholding in Uttam Galva while also trying to make the account standard. Bankers may accept the one-time settlement offer that Uttam Galva has put forward, which is expected to settle 51% of their loans. The indirect shareholding in KSS Petron may not be a problem," another source who is working with the bidders said.

The new bids by Numetal and ArcelorMittal will have to be reworked. Numetal's bid, led by VTB Capital, was rejected as Aurora Enterprises, a trust in which Rewant is a beneficiary, was a partner in the consortium. Other key shareholders of Numetal include TyazhPromExports (TPE) of Russia and Indo International.

In an earlier interaction with DNA Money, Makram Abboud, vice chairman international, VTB Capital, had said, "We already have it in the bid document that Rewant Ruia or any shareholder can exit if it comes in between winning the bid. We have provided for it. If any one promoter becomes ineligible, the other promoters have the option to take over to make the bid eligible." Aurora is a minority shareholder with no right to directorship and management of Numetal.

ArcelorMittal's bid was rejected as L N Mittal had a shareholding in Uttam Galva, a company which had defaulted on loans pegged at Rs 5,000 crore. Mittal has now offloaded his stake in Uttam Galva, which will have to apply to the market regulator Securities and Exchange Board of India stating the change in shareholding. Uttam Galva has also made a one-time settlement offer to the lenders to settle its defaults.

Meanwhile, Numetal on Tuesday filed an application with the NCLT stating that the CoC should not announce any decision unless their application is fully heard by the bench. The next hearing of the case is slated for April 4.

BACK TO SQUARE ONE

• ArcelorMittal and Numetal, an SPV floated by Russia's VTB Capital and Rewant Ruia, will be given a new chance to bid again
   
• The consortium of lenders has rejected the bids of ArcelorMittal and Numetal as they failed to meet the eligibility criteria under the IBC