Lenders reject Numetal, Arcelor bid for Essar Steel

Banks allow second round of bidding, move to further delay resolution

The SBI-led consortium of creditors on Wednesday rejected the bids by Numetal, an SPV floated by Russian lender VTB Bank and Rewant Ruia, and ArcelorMittal for debt-laden Essar Steel, finding them ineligible under the IBC laws that debar related parties from bidding.

The decision, which will further delay the resolution of Essar Steel that owes over Rs 45,000 crore to over 30 banks and other creditors, to reject both the bids was taken at a meeting of the committee of creditors (CoC) of Essar Steel on Wednesday, a banking source said. Numetal and ArcelorMittal were the only two bidders for the debt-laden steel maker.

The lenders have voted to allow a second round of bidding for the nearly crippled 10-million tonneasset at Hazira in Gujarat.

"They (Numetal and ArcelorMittal) were found to be ineligible under Section 29 A of the amended IBC. They did not fall under the satisfactory criterion that the defaulting promoters' link should not be there or connected persons should not be there in the new company that is bidding," the banking source said.

These companies have put up their bids on February 12 but have since been battling with each other amid questions about their very eligibility to bid.

Even though the Luxembourgbased ArcelorMittal has teamed up with Nippon Steel & Sumitomo Metal Corp to bid for Essar Steel, it has been found ineligible for its joint venture with Uttam Galva, which is at the NCLT awaiting resolution now, and Numetal's bid was done in by the fact that one of the promoters of the special purpose vehicle is Rewant Ruia, the son of an Essar Group promoter Ravi Ruia.

Bankers, however, said if these companies delinked their connection from the promoters or standardise their loans they can bid again in the second round of bidding.

The lenders have set an April 2 deadline for the second round of bidding for Essar Steel. But this is unlikely to yield the desired results as biggies like Tata Steel, the Anil Aggrawal-led Vedanta and JSW Steel have reportedly decided against bidding for Essar Steel.

The shareholders of the Mauritius-based Numetal, a special purpose vehicle that focuses on steel and infra space along with manufacturing, are VTB Capital, the PE arm of the Russian stateowned lender VTB Bank and Aurora Trusts in which Rewant Ruia is a beneficiary and owns 25 per cent. The other promoters include the Russian steel and engineering major TyazhPromExports (TPE) and Indo International, a Dubai-based metals trading firm promoted by an NRI. VTB Capital owns majority in Numetal. Bids of these firms were evaluated by resolution professional Satish Kumar Gupta, along with risk advisory Grant Thornton and law firm Cyril Amarchand Mangaldas.

An industry observer said following the rejection of its bid, Numetal may ask Rewant Ruia to exit the firm, something that the company was anyway ready to do. "If public perception is a challenge because of the presence of Rewant Ruia in Numetal or his minority investment in the company, we are ready to change that," Antoine Chemali, a senior advisor at Numetal Mauritius, had said last week.