ArcelorMittal, the world’s largest steel firm, on Monday formally completed the acquisition of the insolvent Essar Steel, marking the entry of a foreign firm into manufacturing of steel in India. Japan’s Nippon Steel will hold 40% in the joint venture with ArcelorMittal holding 60% stake.
The acquisition of Essar Steel will catapult Arcelor to the position of India’s fourth-largest steel producer at a time when the industry is seeing a downturn. Lakshmi Mittal, chairman and CEO of ArcelorMittal, said the acquisition of Essar Steel is an important strategic step. “India has long been identified as an attractive market and we have been looking at suitable opportunities to build a meaningful production presence in the country for over a decade. Both India and Essar’s appeal are enduring,” Mittal said.
Aditya Mittal, president and CFO of ArcelorMittal, has been appointed chairman of AM/NS India, and Dilip Oommen has been appointed AM/NS India’s CEO.
Essar Steel’s creditors, both financial and operational, had claimed dues totalling to Rs. 82,000 crore with the resolution professional of which claims worth Rs. 54,500 crore were admitted. Of ArcelorMittal’s Rs. 42,000 crore winning bid for the company, its lenders are likely to get Rs. 40,910 crore, leaving the rest for operational creditors. This will result in a complete write-back of provisions for most of the lenders. This would also mean the entire amount would get reflected as a write-back under the non-interest income head of the banks concerned in Q3FY20.
Essar Steel was among the first list of the largest 12 stressed accounts that the Reserve Bank of India had drawn up in June 2017 and asked banks to refer to the National Company Law Tribunal (NCLT) and the company was formally sent to the tribunal on June 27, 2017.
Source: Financial Express, December 17, 2019