Essar Steel: Numetal, Arcelormittal bids may be disqualified
THE BIDS WERE FOUND TO BE SHORT OF FULFILLING THE PRESCRIBED ELIGIBILITY CRITERIA UNDER THE INSOLVENCY AND BANKRUPTCY CODE
MUMBAI: The bids submitted by Arcelormittal and Numetal Mauritius to acquire debt-laden Essar Steel Ltd are likely headed for disqualification, potentially putting a question mark over the distressed steelmaker’s future and whether lenders can recover a significant portion of their money.
The bids, currently under technical evaluation by law firm Cyril Amarchand Mangaldas and advisory firm Grant Thornton, were found to be short of fulfilling the prescribed eligibility criteria under the Insolvency and Bankruptcy Code, according to two people with direct knowledge of the matter.
“The recommendations from the advisers are being considered and a final decision will be taken by the committee of creditors led by State Bank of India (SBI),” said one of the people.
A November 2017 change in the Insolvency and Bankruptcy Code has barred owners and associates of companies, whose loans have been classified as non-performing for more than a year, from bidding for distressed assets when they are sold to raise cash for creditors.
It is still unclear whether the committee of creditors will call for a second round of bidding if the current ones are disqualified. However, a distressed asset that is not resolved within 270 days of admission to the National Company Law Tribunal has to go into liquidation under the Insolvency and Bankruptcy Code.
Numetal’s bid faced potential disqualification due to the presence of the Ruia family in its consortium, which could be seen as a violation of the recent changes to bankruptcy laws. Essar Steel is promoted by the Ruia family.
While submitting the bid, Numetal had contended that its bid was legally compliant as the Ruia family has a minority stake in the consortium.
There were questions around the validity of Arcelormittal’s bid, which had sold its stake in distressed steelmaker Uttam Galva Steels Ltd back to its promoters at a huge discount, possibly as a means to qualify as a bidder for Essar Steel and other distressed assets that are up for sale. Mumbai:american private equity fund KKR & Co. and Wipro founder Azim Premji’s family office Premjiinvest have joined the race for acquiring stakes in fashion hypermarket chain Vishal Mega Mart, two people aware of the development said.
The retail chain is currently owned by private equity TPG Capital and south India’s biggest conglomerate Shriram Group. While Vishal Mega Mart Pvt. Ltd (VMMPL), owned by TPG, runs the back end operations, Airplaza Retail owned by Shriram Group runs the front-end stores. Kotak Mahindra Capital is advising the sellers.
KKR and Premjiinvest have submitted separate bids for the stake, the two people cited above said on condition of anonymity.
Us-based Carlyle Group, a consortium of Kedaara Capital and Partners Group, and online retailer Flipkart are among contenders for Vishal Mega Mart, The Economic Times had reported on February 15.
Spokespersons for TPG, Premjiinvest and Carlyle declined to comment, while emails sent to KKR and Shriram Group did not elicit any response.
If a deal materialises, it would be the first exit for a global private equity fund from an asset that has turned around after restructuring.
The Vishal Mega Mart website claims the company operates over 204 stores in over 110 cities and towns.
In 2011, the company promoted by Ram Chandra Agrawal had run up a debt of ₹760 crore with lenders such as HDFC Bank, HSBC, ING Vysya Bank and State Bank of India. It was acquired by TPG and Shriram Group for a total of ₹70 crore.
According to a Crisil Ratings February 2017 report, TPG Capital had infused ₹669 crore into VMMPL till March 31, 2016. It injected an additional ₹100 crore in fiscal 2017.
Debt levels, though reducing, remained high at ₹324 crore (₹528 crore, including compulsory convertible debentures) as on March 31, 2016, it added.
For fiscal 2016, VMMPL reported a loss of ₹36.2 crore on revenue of ₹1,346 crore, against a net loss of ₹60.3 crore on a revenue of ₹1,108 crore for the previous year.
“The main concern for global PE funds is to find the right domestic partner to meet the regulatory requirements and all the foreign funds are in discussions with local retail companies to form consortiums,” said the second person on condition of anonymity.