Uttam Galva has informed the stock exchanges that consequent upon the inter-se transfer, the co-promotion agreement, dated September 4, 2009, has been terminated. ArcelorMittal’s 41,327,931 equity shares in Uttam Galva Steels translate into a shareholding of 29.05 per cent.
In 2009, ArcelorMittal had bought the Uttam Galva shares at Rs 120 a share. However, the inter-se transfer happened at Rs 1 a share. The Uttam Galva stock on Thursday closed at Rs 20.50 on the BSE, up 4.86 per cent.
When the Insolvency and Bankruptcy Code (IBC) was amended in November, questions were raised about ArcelorMittal's eligibility as a bidder as it was a promoter of Uttam Galva, which featured in the Reserve Bank of India’s list of defaulting companies.
According to the newly added Section 29A of the IBC, a person shall not be eligible to submit a resolution plan if such person, or any other person acting jointly with such person, or any person who is a promoter or in management of such person, is an undischarged insolvent. This prohibits promoters or sister concerns of companies with non-performing assets (NPAs) of more than a year from taking part in auctions.
Though ArcelorMittal so far has not commented on its exit from Uttam Galva Steels, sources said it wanted to put to rest all questions raised around Section 29A.
However, a new problem has cropped up. Lenders led by State Bank of India want L N Mittal, promoter of ArcelorMittal, to repay debt of Rs 13.40 billion taken by KSS Petron after the company defaulted on its loans in India. Mittal owns a 33 per cent stake in KazStroyServices (KSS) of Kazakhstan, in his personal capacity, and KSS owns 100 per cent of KSS Petron, which turned an NPA in 2015.
Lenders say Mittal will have to either sell his personal stake in KSS or repay the debt of KSS Petrol if ArcelorMittal wants to bid for stressed assets in India.
ArcelorMittal, however, said earlier that there was no legal basis that would prevent ArcelorMittal from participating in the auction process should it decides to do so. “ArcelorMittal has no connection with Petron and does not believe this company has any relevance to the process. ArcelorMittal is a financially sound company with strong expertise in turnaround situations,” it had said.