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.
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 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.