Mumbai: The ArcelorMittal Netherlands BV, and Nippon Steel and Sumitomo Metal Corp. joint venture (JV) is open to working with the promoters of Essar Group to successfully implement the resolution plan for debt-ridden Essar Steel Ltd if required, two people close to the development told Mint on condition of anonymity.
The two firms, which have submitted a combined bid for the beleaguered steel maker, have taken into consideration the dependability of other assets of the Essar Group which are crucial to its steel business but are outside the ambit of insolvency proceedings so far and continue to be controlled by the Ruias, the promoters of the group.
Even as the spokespersons of Arcelor and Nippon declined to comment on the details of the resolution plan submitted by them on 2 April, they said that it takes care of all the “contentious issues" that may arise in case they acquire Essar Steel.
To be sure, Essar Steel uses the facilities of Essar Ports and Essar Power for supply of raw materials and power, respectively. While Essar Steel is undergoing resolution proceedings under the Insolvency and Bankruptcy Code, the power and port assets are outside the insolvency net.
One of the issues that the potential acquirer may have to contend with is ensuring a steady supply of raw materials in case the facilities of Essar Ports and Essar Power are unavailable after the acquisition.
Arcelor, however, stands confident in its pursuit of Essar Steel.
“Those (unavailability of port and power assets) are also taken care of in our resolution plan. In some cases there are alternatives available and in some cases we may have to negotiate some solutions where the facility itself has no other purpose of being. We are confident we will find a solution. It certainly does not deter us from our interest in Essar," Brian Aranha, executive vice president (strategy, technology and R&D) at ArcelorMittal told Mint in an interview on Tuesday.
On 8 November, Mint had reported that Tata Steel Ltd, one of the firms which had submitted an expression of interest for Essar Steel, had secured an informal commitment from the Adani Group for use of its port in Hazira, Gujarat, if it wins the bid for the bankrupt steelmaker, factoring the contingencies it may face due to unavailability of power and port assets of Essar.
As on 31 March 2016, Essar Steel owed around Rs45,000 crore to its lenders, with State Bank of India being the lead bank. The other firms which submitted resolution plans in the second bidding round for the steel firm (which concluded on 2 April) included Vedanta Resources Plc and Numetal Mauritius along with JSW Steel Ltd.
Commenting on the bid, Hideki Ogawa, managing director of Nippon Steel India, said that Arcelor-Nippon acquiring Essar Steel assets could bring in the highest foreign direct investment so far from Japan into India.
“Looking at India, the size of the assets and the growth potential of these assets, Essar Steel was the best fit for us. The growth potential of the asset is very high considering India is expected to grow at a rate of about 7%. We understand what capex is needed and have done evaluation on the basis of which we have bid for it," said Ogawa.
Kavya Kothiyal contributed to this story.