Ruias set to win back control of Mahan Power as ArcelorMittal bid falters

Banks reject L N Mittal's conditional offer

The Ruias of Essar Group are set to wrest back control of their 1,200-Mw Mahan Power project in Madhya Pradesh after a rival bid from ArcelorMittal failed to meet expectations of the lenders.  

L N Mittal-owned ArcelorMittal had made a non-binding bid of Rs 4,800 crore for the company in December last year, pending its own due diligence. As against this, the Ruias had made an upfront cash offer of Rs 3,450 crore as one-time settlement.

After its due diligence, ArcelorMittal revised its offer and attached fresh conditions to the bid, citing high contingent liability of the power company, a banking source said. Subsequently, the lenders have requested the Ruias to submit the restructuring proposal for the company. The Ruias will pump additional equity into the company so that it can meet its other liabilities. A final decision is expected in the next few weeks.

The lenders led by Power Finance Corporation, REC and ICICI Bank were in talks with bidders of the company to reduce their bad debt. The company had failed to repay its debt worth Rs 7,000 crore after its coal mine was cancelled by the Supreme Court in September 2014 along with allocations of 200 other coal blocks.

When contacted, an Essar official declined to comment. An ArcelorMittal spokesperson, too, refused to comment.

Power companies had won a reprieve from the Supreme Court after the Reserve Bank of India (RBI) in February 2018 asked banks to send all companies to the National Company Law Tribunal (NCLT) for debt resolution under the Insolvency and Bankruptcy Code, 2016. On April 2 this year, the Supreme Court set aside the RBI circular and said the “same pill for every ill” solution would not work for companies.

Power firms had complained that their operations would come to a standstill due to the circular while banks were fearing an additional bad debt of Rs 2.25 trillion. The Supreme Court judgment paved the way for settlements rather than forced insolvency proceedings.

The Ruias and L N Mittal were also locked in a fight over the acquisition of Essar Steel. The NCLT has already cleared a proposal from ArcelorMittal for Essar Steel, which has offered Rs 42,200 crore to banks. The acquisition is currently pending in the Supreme Court after Essar Steel’s banks and unsecured lenders litigated with each other on how to share the upfront cash, which is being offered.  

Apart from this, ArcelorMittal is also spending another Rs 2,500 crore to acquire the Odisha slurry pipeline owned by Essar group. In order to become eligible to bid for the company, ArcelorMittal had to pay – following a Supreme Court order -- more than Rs 7,000 crore to clear the dues of loan defaulter, Uttam Galva Steels - where it was the co-promoter and later sold its stake and of another loan defaulter, KSS Petron.