Home > companies > news > Lenders keen to offer Uttam Galva units to single bidder

Mumbai: The resolution process of Uttam Value Steels Ltd (UVSL), which was admitted for insolvency proceedings on 26 June, may have to wait till there is more clarity on the status of insolvency proceedings against Uttam Galva Metallics Ltd (UGML), two people aware of the development said. Both companies are subsidiaries of Uttam Galva Steels Ltd.

Uttam Value Steels and Uttam Galva Metallics owe banks 3,200 crore and 2,200 crore, respectively. “Uttam Galva Metallics and Uttam Value Steels are integrated facilities although they operate as separate legal entities," said the first of the two people cited above. “The lenders could face difficulty in attracting buyers if both plants are not offered together."

UGML manufactures pig iron from iron ore, which is a raw material for intermediate products for manufacturing value-added steel. The entire hot metal production of UGML is supplied to UVSL located close to it the same day. The company also has a captive power plant, which addresses almost 100% of its power generation demand.

State Bank of India (SBI) had approached the National Company Law Tribunal (NCLT) seeking bankruptcy proceedings against both companies, but NCLT while admitting the insolvency plea of Uttam Value Steels has reserved its order on Uttam Galva Metallics till 11 July. An email query sent to SBI, the leader of the consortium of banks, and to Rajiv Chakraborty, the interim resolution professional (IRP) appointed for Uttam Galva Steels, remained unanswered until press time.

Earlier, the subsidiaries of debt-laden Uttam Galva Steels had argued that Ziraat Bankasi, the second-largest state-owned bank of Turkey, had written to SBI that one of its high net worth clients was interested in acquiring its assets. Earlier, on 6 June, another bench of NCLT had adjourned the insolvency plea of Uttam Galva Steels to 16 July, following requests from the company as well as its lenders.

UVSL’s plant was commissioned in 1995 in Wardha, Maharashtra. It has a rolling mill with an installed capacity of 1 million tonnes per annum (mtpa) of hot rolled coil, along with steel melting shop to produce 1.08mtpa of steel through the electric arc furnace route. Its downstream facilities include cold rolled coil mill (0.38mtpa capacity) and galvanized plain/galvanized corrugated sheets/coil line (0.25mtpa capacity). Its engineering division is located at Murbad in Maharashtra’s Thane, and is engaged in steel fabrication, design and manufacturing of heavy equipment for hydrocarbon, oil and gas, steel and power plants as well as executing projects on a turnkey basis.

Mint reported earlier that the National Company Law Appellate Tribunal (NCLAT) is expected to hear a petition on the insolvency resolution of Essar Steel Ltd. ArcelorMittal India Pvt. Ltd—which is a key contender for the company and a former shareholder in Uttam Galva Steels Ltd —has deposited 7,000 crore in an escrow account to qualify for the bidding.

If NCLAT declares ArcelorMittal eligible, the money in the escrow account will go towards settling Uttam Galva’s debt, but is unlikely to impact the ongoing bankruptcy of UVSL. Mint reported in October 2017 that AION Capital, a special situations fund, had submitted a bid to acquire a majority stake in Uttam Galva Steels, proposing to recast the company’s outstanding debt of close to 5,500 crore into four parts, but the lenders had rejected the offer.

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