The Ahmedabad bench of National Company Law Tribunal (NCLT) on March 8 approved global steel giant ArcelorMittal’s Rs 42,000 crore takeover bid for Essar Steel India Ltd (ESIL).
While pronouncing its order, the tribunal suggested a “better implementation” of ArcelorMittal’s resolution plan. As per the plan, the global steel giant agreed to pay 92 per cent of its offer share to financial creditors and eight per cent to the operational creditors. On this, the tribunal suggested increasing the operational creditors’ share to 15 per cent. However, NCLT said that the Committee of Creditors (CoC) will have the final say on the resolution plan.
“This court has limited jurisdiction and cannot impose its view on the commercial wisdom of the committee of creditors,” Business Standard quoted the NCLT order’s operative part.
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In the resolution plan, ArcelorMittal agreed to an upfront payment of Rs 42,000 crore towards the debt resolution of ESIL, with an additional Rs 8,000 crore of capital infusion into the company for its operational purposes.
In July 2017, the Reserve Bank of India shortlisted 12 companies including ESIL in the steel and infrastructure sector for insolvency proceedings. But, in Essar Steel’s case, the resolution process was extended for nearly 600 days, as the Ruia family, who are the promoters of Essar Steel, and several of the company’s operational and financial creditors filed repeated litigations delaying the proceedings.
In October 2018, Essar Steel’s CoC approved the resolution plan and takeover of the company by bidder ArcelorMittal. On the same day, the Ruias came up with a proposal to repay Essar Steel’s total debt of Rs 54,389 crore and reclaim the company. The tribunal rejected their sudden offer.
Now, the Ruias are left with only the option of approaching the National Company Law Appellate Tribunal to challenge the NCLT’s Friday order. The ArcelorMittal in a statement claimed that it would complete the transaction immediately.
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ArcelorMittal is the world’s largest steel and mining company, holding operations in sixty countries. However, the company has faced multiple failures in its attempts to enter the Indian steel market over the last ten years. With the Essar steel take over, the company would own a 10 million tonne (mt) per annum steel mill in Hazira, Gujarat, which is involved in ore beneficiation, pellet making, iron making, steel making, and downstream facilities.