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Round two bidding for Essar Steel clearly is going to be pitched between the world’s largest steelmaker, ArcelorMittal, and India’s largest, JSW Steel. On Monday, ArcelorMittal came out strongly against JSW Steel joining Numetal. “JSW Steel joining Numetal is clearly a defensive move — they don’t want competition. Competition is good for the country’s industry and good for consumers. Also, India has an ambitious target of increasing steel production to 300 million tonnes. It needs new players to achieve that. We continue to believe ArcelorMittal and Nippon are the strongest possible partner for Essar Steel,” a company statement said.
Seshagiri Rao, joint managing director and group chief finance officer of JSW Steel, reacted to ArcelorMittal’s statement by saying: “This is a competitive bidding process. India is an open economy, anybody can participate. We were bidding for assets on the eastern side, but were outbid. Then this came up, but we were not allowed to enter by the lenders. Numetal approached us and it is a strong player. We decided to join.”
A source close to ArcelorMittal said after the deal, JSW Steel would have more than 90 per cent share of the steelmaking capacity in western India. “That is monopoly. You cannot have a situation where you have all the steelmaking capacity in one region in the hands of one player. Of course, maybe they have some idea to do a deal with the Ruias in the future. But that would be against the new Format VA addendum,” the source said.
The Format VA addendum is a new clause that requires bidders to legally confirm that they have not entered into any arrangement with any member of the existing promoter group relating to transfer or acquisition of any shareholding of Essar Steel India directly or indirectly, prior to or after submission of a resolution plan.
Rao, however, said: “JSW has always adhered to the law. We are not going to deviate from the law.”
The stage for a L N Mittal-Sajjan Jindal face-off was being set for some time now. In a clear reference to Mittal’s bid for Essar Steel, Jindal had last week said: “In the spirit of the law, it is not fair to allow promoters of a defaulting firm to participate. I will be surprised if that kind of a thing is permitted. If the law itself is changed to allow a defaulter to bid, then it is fine. But when the IBC says that the promoter of a defaulter is not allowed to bid, and then that promoter cures himself by selling the shares, then that is a mockery of the system.”