ArcelorMittal isn't a loan defaulter, is eligible to acquire Essar: LN Mittal

New Delhi: Undeterred by the initial setback in its plans to acquire debt-laden Essar Steel, ArcelorMittal chairman and CEO Lakshmi Mittal has emphasised that his company has never defaulted on any bank loan and held that he was on firm legal ground to meet the eligibility criteria under Clause 29A that prevents promoters of defaulting companies to bid for the assets on sale.

“We have never defaulted on any bank loan. It is true that we had a shareholding in Uttam Galva which was declared a non-performing asset but we had no board position or management involvement in this company and no governance responsibility and we wrote off our investment in 2015,” he said in an interview with Financial Chronicle, explaining ArcelorMittal’s involvement in the defaulting Uttam Galva Steels that has cast a shadow on world’s largest steel maker’s bid for Essar Steel.

Earlier this week, a top executive of ArcelorMittal had claimed that the company may clear Uttam Galva’s dues as a “goodwill gesture.”

Executive vice-president (strategy, technology, R&D) Brian Aranha had told a visiting group of journalists at ArcelorMittal’s R&D unit in Montataire, France, that even the goodwill gesture is a substantial amount.

Commenting on the Insolvency and Bankruptcy Code (IBC) and the introduction of Section 29A, Mittal said the insertion in the code was well meaning but it had led to confusion leading to delays.

“Section 29A was introduced for a clear reason and the spirit of the law makes sense when you take into consideration the backdrop in India,” he said.
“In reality, the situation it has inadvertently created  is causing significant delays and confusion which is not ultimately in the best interests of the assets and its stakeholders in the process,” Mittal added.

“I expect there will have to be some modifications and indeed I believe these are already being discussed,” he said emphasising that the whole conversation is about eligibility to the detriment of price to creditors and the strength of the plans to secure the long-term sustainability of the asset.

The steel baron explained the strategic significance of Essar for ArcelorMittal saying the Indian economy and the Indian steel industry are expected to grow strongly in the coming years.

“To support its Make in India programme, designed to boost the country’s manufacturing industry, India will need to expand its domestic steel-making capacity. Indeed it has an ambitious plan to triple it to 300 million tonnes per annum by 2013,” he said, stressing that ArcelorMittal’s presence can help India achieve its aims through injection of capital, technology and management know-how.

“At present we are very much focused on Essar. Our plan for development (of) the asset is in two phases — the first to stabilise the asset and to bring it back to current rated capacity and the second to grow it considerably through brownfield expansion over the longer term,” he said.

“Once we have a footprint in the country, we can see what other opportunities present themselves over the longer-term; but this is the clear short-to-medium term priority,” he said.

In the first round, bids by ArcelorMittal and Numetal were termed ineligible. ArcelorMittal’s investment in defaulting Uttam Galva proved to be a stumbling block though its bid was reported to be Rs 35,000 crore. Also, the National Company Law Tribunal had found that ArcelorMittal was liable to repay dues to the lenders of KSS Petron as well as Uttam Galva before becoming eligible to bid.

The Numetal’s bid, pegged at Rs 19,000 crore, also came under the scanner because of the minority shareholding of Aurora Enterprises, where Ravi Ruia’s son Rewant was the major beneficiary. This relationship made its bid for Essar ineligible under the terms of IBC.

Both Numetal and ArcelorMittal had challenged the resolution professional’s decision in the National Company Law Tribunal (NCLT) cancelling their bids in the first round. NCLT has now asked CoC and resolution profession to examine the eligibility of the two bidders afresh. This process is continuing at present where the companies have been asked to restructure their bids again.