Metals magnate Anil Agarwal wants the dedicated bankruptcy court to consider the Vedanta Resources bid for Essar Steel , arguing that bankers to the stressed alloy-maker themselves had urged him to join the auction to increase competitive intensity and fetch creditors a better price for the troubled mill.
“I’m not saying that I’m the highest bidder. But we believe that we have put in a very high offer and why should the public be deprived of their money if somebody is paying a higher bid,” the Vedanta chairman told ET in an exclusive interaction.
Agarwal’s Vedanta was called to join the race for the debt-laden steel asset when questions arose over the eligibility of the firstround bidders, Russian investment bank VTB-backed Numetal, and Lakshmi Mittal’s ArcelorMittal. But later NCLT directed the bankers to take the first round of bids to its logical conclusion.
In view of this, Vedanta’s bid made in the second round was never opened. Vedanta, which is yet to formally begin a business in ferrous metals, is seen in the industry as an aggressive bidder. It has been shortlisted as the surprise winner putting in the highest offer for the Jharkhand-based Electrosteel Steels, and that win marks the group’s formal entry into ferrous metals.
“The bankruptcy law is a bold and good step but the delays are causing the government and companies… a lot (by way) of costs. A sense of urgency is very important,” added Agarwal, who has made formerly government-run zinc and aluminium producers hugely profitable after privatisations.
“As far as Essar (Steel) is concerned, we had been asked to look at it because there were only two parties (Numetal and ArcelorMittal) and a third party was asked to look at it and we were fully eligible (having obtained the expression of Interest documents),” he said.
“We have spent more than Rs 100 crore just to secure comfort from banks for putting the bid for Essar Steel and a lot of money has been spent to prepare the documents. Hundreds of hours and hundreds of crores have gone to prepare the bid and now they are saying that they don’t want to open the bid. This is a concern,” said Agarwal.
“If you (bankers) have asked for a legitimate bid, it should be opened and whoever is the highest bidder should be looked at,” Agarwal reasoned. OnElectrosteel, Agarwal says his group has done everything according to the bankruptcy code process and yet “somebody” (the Renaissance Group) has gone to the appellate court. “It is again very unfortunate because in the process, the company suffers and the company gets sick. So, we would like to close it as soon as possible,” he said.
OILFIELD BIDS AND THE HURDLES…
On bidding for all the 55 blocks under the open acreage licensing policy (OALP), Agarwal complimented the government for “taking away” 90% of the earlier checks, a simplification he described as “path-breaking”.
“…This is the first time that they are looking at not more revenue but more oil and gas production,” Agarwal said.
However, he still has a few reservations. World over, the total revenue share for government’s is about 50%, whereas in India it is 65-75%. Currently, producers are not able to realise the international price of crude (no exports permitted), which is one of the major factors behind muted interest by foreign investors.
“Some vested interest has again played a role. If you increase the production of oil and gas beyond a level, you will be penalised. I never heard anywhere in the world where you are penalised for increasing production. So vested interests interests have worked on it to make sure that Indian production does not increase,” he alleged.
“(About) 18% of the world population resides here and if we just produce 15% of the oil (we need), we will always remain poor. Someone like me will have to hold the bull by its horns,” he said, explaining the reason behind Vedanta putting in bids.
PUSHING VEDANTA EXECUTIVES…
Vedanta has bid for all the blocks, something he says he pushed his executives to do.
“My executives just wanted to bid only for 10 blocks. I fought with them and said why not 55 (blocks)? So I really persuaded my people and it took a lot of time to put an interest for all 55 blocks. Somebody has to be an Indian to help kick-start the economy,” Agarwal said, referring to his decision to go all the way despite certain reservations on the bidding conditions.
On Aramco’s proposed investment in a refinery in India, Agarwal said the Saudi Arabian company should also be asked “to set aside at least 25% of their money for exploration” of oil in India.
“I would encourage them to explore here because our cost of production is only $6 (a barrel) and they will be importing at $70. Exploration will also create millions of jobs in production both offshore and onshore,” Agarwal reasoned.
ON EXPANSION PROJECTS…
Agarwal is confident that his group has the wherewithal to fund the bids in addition to the greenfield and brownfield expansions it has lined up.
“People believe in us and we are the only company in the country with over $33 billion invested in India’s real foreign direct investment.
We raise the money here and every investor who has invested in us is smiling because he gets good returns,” he said.