ArcelorMittal, Vedanta, NuMetal-JSW bid for Essar Steel in second round

3 April 2018

Vedanta Resources and JSW jumped into the fray to buy bankrupt Essar Steel,with the Russian bank VTB roping in the Sajjan Jindal-led steel firm to increase its chances of securing the prized asset in a day of dramatic developments on Monday.

The Anil Agarwal-controlled Vedanta made a surprise entry into the race for Essar and will now jostle for capturing control of the firm with ArcelorMittal and the Numetal-JSW consortium. VTB is the largest shareholder in Numetal

JSW replaced Rewant Ruia, whose presence in the Numetal consortium was frowned upon by banks and lawyers. The committee of creditors overseeing the sale of Essar Steel declared the first bids of Numetal and ArcelorMittal ineligible last week, prompting a fresh rounds of bids from all interested parties that had submitted expressions of interest (EoIs).

April 2 was the date for submission of new bids but the identity of the winner will be known only after the Ahmedabad bench of National Company Law Tribunal (NCLT) disposes of a petition by Numetal.

Numetal had contested its disqualification by the committee of creditors last month before the tribunal.

In an interview over telephone, Anil Agarwal, chairman of Vedanta Resources, explained the group’s surprise move. “Earlier we were busy with Electrosteel Steels. Essar promoters were bidding for their own asset and so we were not sure about our plan. Also, as the financial year is drawing to a close, we observed that our balance sheet is strong enough to take on another acquisition.

Vedanta can offer its gas for the blast furnaces and the iron ore it exports for the plant, in case it gets to own it.”

“Vedanta investors perceived Essar to be a great asset and our balance sheet can take it. So things changed and we decided to go with it,” he added.

JSW too was keen on bidding for Essar but could not do so on its own as it had not submitted EoI. After losing out to Tata Steel in the race for Bhushan Steel and Power and Bhushan Steel, JSW shed its earlier misgivings on concentrating all its investments in the southern region and the west coast.

JSW’s joint managing director MVS Seshagiri Rao confirmed about the development over phone. “We will partner Numetal as an investor. They have put in a strong bid and have the required financial capability. We joined them to strengthen it further,” he said.

Interestingly, it was Numetal that made the first approach. “They (Numetal) approached us. We thought it was a good offer, particularly in the context of us not getting other assets,” Rao explained.

“Since resources are limited we were earlier concentrating on the eastern region. The opportunity came in the form of a rebid for Essar Steel. We tried to bid independently and wrote to the RP too, but we were not permitted. This was the only opportunity left for us to join the bid,” he added.

ArcelorMittal’s bid for Essar is tipped to be in the region of Rs 55,000-56,000 crore.

“For several years to come, India is likely to experience a significant upswing in demand for all metals, which makes a large operating steel asset quite attractive from a strategic inorganic growth opportunity perspective.

Given the past challenges in setting up greenfield projects, the current assets also provide an instant market access to new entrants to the Indian steel industry,” said Anjani Agarwal, global steel leader at EY.

JSW Steel has been an aggressive bidder for steel assets in the bankruptcy courts. It participated in the bids for Monnet Ispat, Bhushan Power and Steel and and Bhushan Steel Ltd. It was the only bidder in the fray for Monnet Ispat which it bid for Rs 3,750 crore.