ArcelorMittal likely to bid for Uttam Galva after its admission to NCLT

ArcelorMittal had taken a bulk of Uttam Galva's debt to become eligible for the Essar Steel bid under the insolvency law and became a significant financial creditor

ArcelorMittal is likely to bid for Uttam Galva Steels, which was admitted to the National Company Law Tribunal (NCLT) recently, and whose co-promoter it once was.

The NCLT Mumbai Bench on October 1 admitted a petition filed by State Bank of India (SBI) under the Insolvency and Bankruptcy Code (IBC).

People in the know said ArcelorMittal would bid for the company. However, the company declined to comment.

Going through the NCLT route will crystallise Uttam Galva debt for ArcelorMittal, added sources.

“There would be no hidden liabilities,” one of them said.

The world’s largest steelmaker had taken the bulk of Uttam Galva’s debt to be considered eligible for the Essar Steel bid under the insolvency law and became a significant financial creditor.

The auditors’ report — at the end of Uttam Galva’s results ended March 31 — said ArcelorMittal Luxembourg and ArcelorMittal India paid $169.04 million and Rs 4,922 crore, respectively, to secured financial lenders to clear foreign currency loans, overdue rupee term loans, and working capital loans, together with interest, acting as a lender providing financial support to Uttam Galva.

However, Uttam Galva defaulted on the balance of its debt. According to the company’s annual report for 2019-20, it defaulted in principal repayment of Rs 616.05 crore and interest of Rs 81.63 crore.

The annual report also mentioned with the account of the company becoming a non-performing asset (NPA) with the lenders, SBI on March 12 filed a petition under the IBC before the NCLT’s Mumbai Bench to initiate the corporate insolvency resolution process (CIRP).

This was not the first time SBI moved a petition to initiate the CIRP in Uttam Galva. The company happened to be part of the Reserve Bank of India’s second list of NPAs.

In November 2018, SBI withdrew its petition after ArcelorMittal paid Rs 7,469 crore on account of Uttam Galva Steels and KSS Petron to clear their debts and be considered for the Essar Steel bid (most of it was on account of Uttam Galva).

After taking on the debt, in 2018, ArcelorMittal had said it was considering whether and how to acquire ownership of Uttam Galva. It was a good-quality asset and a strong synergistic fit with Essar Steel, it had said then.

Uttam Galva has a cold rolling capacity of 1.2 million tonnes per annum.

The insolvency law does not allow defaulting promoters to bid for assets; both Uttam Galva and KSS Petron had been classified as NPAs for more than a year, which made ArcelorMittal ineligible to bid for Essar Steel under the IBC.

ArcelorMittal was a co-promoter of Uttam Galva. In 2009, it had entered into a co-promotion agreement with the Miglani family and bought a 32 per cent stake in Uttam Galva, and this paved its entry into India.

However, in a bid to become eligible for Essar Steel, Arcelor transferred its shares to a Miglani group company at Rs 1 a share in an inter-se transfer, ahead of submitting the bid.

But the Supreme Court found it ineligible and exercised its extraordinary powers to give bidders time to make overdue payments.

ArcelorMittal paid and became the winning bidder for Essar Steel.