Essar Steel auction: Increasing questions on eligibility of bids by ArcelorMittal, Numetal

Ahead of the crucial March 5-meeting between the resolution professional (RP) and Committee of Creditors on Essar Steel’s auction, murmurs of a possible delay in the process are getting louder.

This follows increasing correspondence between the bidders and consultancy firm Grant Thornton and legal firm Cyril Amarchand Mangaldas, both of whom are evaluating the bids.

The resolution professional has to present the eligible bids to the Committee on March 5. The Committee, which consists of lenders, then approves one of the bids.

ArcelorMittal and Numetal Ltd are the two bidders for Essar Steel, which was referred to the National Company Law Tribunal last year over unpaid bank loans of about Rs 45,000 crore.

“Yes, according to the original schedule, the RP should be meeting the CoC on March 5. But work (evaluation of bids) is still in progress and needs to be completed before the March 5 meeting,” an executive in the know told Moneycontrol. “The meeting could be postponed,” he added.

Both Grant Thornton and Cyril Amarchand Mangaldas have been corresponding with the two bidders almost daily, given the host of issues involved.

For ArcelorMittal, its stake in Uttam Galva – a defaulting company – is turning out to be a millstone. According to the amendment in Insolvency and Bankruptcy Code, a promoter of a defaulting company can’t bid for stressed assets. While the Lakshmi Mittal-owned company had sold the stake before bidding for Essar Steel, questions remain.

For Numetal’s, the problem lies in shareholder Rewant Ruia’s lineage. Rewant is the son of Ravi Ruia, one of the founders of Essar Steel and thus could be called a “connected person.” Rewant’s Aurora Enterprises owns 25 percent in Numetal.

It is learnt that Numetal has now offered to buy out Rewant’s stake if it comes to that. Russia’s VTB Bank holds 40 percent and Indo International Trading and Tyazhpromexport (TPE), a leading Russian engineering firm, are the other shareholders.

“According to the proposal submitted by Numetal, the company has clarified that if any of the partner is found ineligible then its share will be bought out by the other three partners,” said an executive.moneycontrol