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HomeEconomyRussia's top bank willing to buy out India's sick Essar in a...

Russia’s top bank willing to buy out India’s sick Essar in a $6 billion race

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A VTB-led consortium’s bid will take on Lakshmi Mittal’s ArcelorMittal, to acquire indebted Indian steel mill, Essar.

A consortium led by VTB Group, Russia’s second-largest bank, said it’s willing to buy out a local partner to ensure its offer for an indebted Indian steel mill meets government rules, setting up a contest with billionaire Lakshmi Mittal.

Other investors in the group are willing to buy out Rewant Ruia’s stake in investment vehicle Numetal Ltd., Antoine Chemali, senior adviser for Mauritius-based Numetal, said in an interview in Mumbai on Thursday. That’s likely required because Ruia’s father is the founder of Essar Steel India Ltd. and under India’s bankruptcy rules, owners of distressed assets can’t bid to acquire those assets in the insolvency process. Ruia doesn’t have a board seat in Numetal, Chemali said.

Essar Steel could fetch a valuation of at least $6 billion in a sale, people with knowledge of the matter said last month. The process has been delayed after advisers to the resolution professional appointed by an insolvency court pushed back on the rival bids, citing rules that make both ineligible.

Claims of about 518 billion rupees ($8 billion) on Essar Steel have been admitted under the bankruptcy process. A successful sale of the mill will be a triumph for Prime Minister Narendra Modi’s government, which is pushing to resolve $210 billion of stressed assets and spur lending in Asia’s third-largest economy before elections due next year.

A large part of the VTB-led consortium’s bid will be in cash and has “both the immediate and long-term solutions for the stakeholders,” Chemali said without disclosing further details. ArcelorMittal, the world’s biggest steelmaker, submitted a higher offer than the VTB investor group, people familiar with the matter said last month.

As part of the resolution proposal for Essar Steel, Numetal is proposing to raise production to full capacity at 9.7 million tons from the current level of 60 percent, Chemali said. The revival plan also includes completing an unfinished coke oven plant and a pellet manufacturing facility, he said.

All the stake holders — including creditors and the resolution professional — are seeking to reach a resolution before the April 29 deadline for Essar Steel’s sale, Chemali said.

Other than the indebted mill, Numetal is also looking at other growth opportunities in India including in infrastructure and related fields, he said — Bloomberg

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