Insolvency: Miglani family in talks with foreign investors to settle dues

A buoyant steel market has prompted the Miglani family to open a dialogue with foreign investors for settling the dues of group companies facing insolvency proceedings, other than flagship entity Uttam Galva Steels.

Sources disclosed talks were on with foreign investors for Uttam Value Steels and Uttam Galva Metallics. 

These two companies had been referred like Uttam Galva Steels to the National Company Law Tribunal (NCLT); however, a decision on admission for insolvency proceedings has yet to be given.

The lenders had also been approached for Uttam Galva Metallics and Uttam Value Steels. The former’s fate is now linked to that of Essar Steel, also undergoing insolvency resolution.

ArcelorMittal had parked Rs 70 billion for Uttam Galva Steels and KSS Petron, classified as non-performing assets for more than a year, to become eligible for bidding at Essar Steel.

The amount on account of Uttam Galva Steels was around Rs 60 bn. The matter is now pending for a decision before the National Company Law Appellate Tribunal (NCLAT).

The combined debt for Uttam Galva Metallics and Uttam Value Steels would also be around Rs 60 bn. The Miglani family is also open to giving up control of the companies to investors, it is understood. 

The move to settle dues of the two companies at this juncture are led by a significantly improved steel market. An industry source says it has not been this good in years. “Suddenly, valuation of the companies is close to the debt,” explained sources.

The main reason for this cheerier environment is improved domestic steel consumption growth by 7.9 per cent in 2017-18, up from 5.2 per cent in the year’s first nine months, according to ratings agency ICRA. 

In the final quarter, the key drivers for demand were the automobile sector and improving demand for long steel from the construction sector. As a result, domestic hot rolled coil prices rose  from Rs 40,000 a tonne in end-December 2017 to Rs 45,550 a tonne by end-May.

Between Uttam Galva Metallics and Uttam Value Steels, the entire product chain, from pig iron to galvanised steel, is in place. Annual capacity in the two companies is about 500,000 tonnes each; the plan is to take this to two million tonnes.

At one point, Posco of Korea was interested but that would have involved additional debt to complete the projects.

Resolution at Uttam Galva Steels would now depend on the NCLAT order. At a recent hearing in the NCLT’s bench in Mumbai, the tribunal was informed about ArcelorMittal transferring funds for debt repayment.

The offer was, however, subject to the condition of it being declared an eligible and successful bidder for Essar.

NCLT has fixed the next date of hearing for Uttam Galva on July 18, as hearing in the Essar case at the appellate body, NCLAT, would resume on July 2.