ArcelorMittal joins race to acquire Bhushan Steel under bankruptcy code

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ArcelorMittal, the world’s largest steel company, has joined the bidding race for stressed steel assets in the country by expressing interest to acquire Bhushan Steel.

Top banking sources told ET that LN Mittal-led ArcelorMittal has submitted an expression of interest (EoI) for Bhushan Steel, which has been referred to National Company Law Tribunal (NCLT) under Insolvency and Bankruptcy Code.

This provides ArcelorMittal, which failed to make much headway in setting up greenfield steel projects in India, an opening to pick up good steel assets in the country at what is widely believed to be reasonable prices, sources said.

“We don’t comment on M&A speculation and rumour,” an ArcelorMittal spokesperson said in response to ET’s query. According to media reports, Korean steelmaker Posco, which faced delays in getting its proposed 10 mt greenfield steel unit in Odisha off the ground for over a decade, is also in the fray for stressed assets like Bhushan Steel and Essar Steel.

India is one of the world’s fastest growing markets for steel, including automotive steel, and the country is battling cheap imports from Japan and South Korea.

Bhushan Steel has a significant presence in auto steel categories with a 5.6-million tonne (mt) integrated steel unit, including a cold rolled facility, in Odisha. The company owes nearly Rs 42,000 crore to lender banks and was admitted into NCLT in July 2017.

It is one of the two biggest companies to have been admitted under insolvency proceedings this year along with Essar Steel. EoIs for companies referred to NCLT have to be submitted to the insolvency resolution professional (IRP) within a stipulated time period, said an insider in one of the stressed steel companies. Vijaykumar Iyer, IRP appointed for Bhushan Steel, has sought resolution plans by December 23.

ArcelorMittal, a leading global auto steel player, has been looking to build up a presence in India for well over a decade now. It had earlier planned two greenfield ventures of 10-12 million tonne capacity each in Jharkhand and Odisha. However, it was plagued by mining issues and land acquisition problems that took a toll on the fate of the proposed projects.

Later in a shift in strategy, the company chose the M&A route and picked up a stake in Uttam Galva Ltd. It had also evinced interest in a facility in Karnataka. In May 2015, ArcelorMittal entered into talks with the public sector Steel Authority of India Limited (SAIL) for a Rs 5,000-crore equal joint venture in automotive steels with an annual capacity of 1.5 mt. The inputs were to come from SAIL’s new hot strip mill at Rourkela Steel Plant, which has a capacity of 3mt. The two potential partners were reportedly close to finalising a deal on the same, barring a few commercial issues. The deal is still reported to be ‘in the works’ though the timeline for reaching an agreement has been breached.

The Insolvency and Bankruptcy Code (IBC) has created a legal time-bound framework for the transfer of ownership of assets referred to NCLT. There is a 180-day timeline for deciding the resolution plan, which can be extended up to 270 days. Potential investors will be asked to submit resolution plans for the companies they bid for, which includes buying controlling stake in these firms. After receiving the EoIs, the IRP will prepare a shortlist to invite potential bidders.

Source: ET