Making ArcelorMittal ineligible would send a wrong signal: Narayanan Vaghul

Essar Steel bids from ArcelorMittal and Numetal — a company 40 per cent owned by Russia's VTB group and 25 per cent by a trust where Ravi Ruia’s son Rewant is a trustee — are awaiting clearance from law firms on eligibility. But Narayanan Vaghul, a former independent director and chairman of the audit and risk committee of ArcelorMittal, tells Ishita Ayan Dutt that if ArcelorMittal is found ineligible, it would send a wrong signal to the global investment community. Edited excerpts:

What do you think of ArcelorMittal's bid for Essar Steel?


I was quite thrilled that ArcelorMittal made a bid. I was on the board till last year. It is one of the largest steelmakers in the world, spread across several continents. I am happy that they are planning to do something in India. They have been wanting to for more than a decade now. First in Odisha, and then Karnataka, but it didn't quite work out. What ArcelorMittal would bring to the industry is not just professional expertise but also research and technology.


I was on the audit committee of ArcelorMittal and they have brought down net debt from $21.8 billion to $10.1 billion since 2012, when the steel industry was going through a difficult time. This was done entirely by cost-cutting.


What do you think of the eligibility test that ArcelorMittal is being put through because of its stake in Uttam Galva?


I don't know the legal aspects. But I was on the board when ArcelorMittal made the investment and it's minuscule compared to the turnover of ArcelorMittal, which is around $68 billion. Plus, they were not on the board or part of the management.


I would like to say that if they are found ineligible on this technical ground, then it would send a very wrong signal to the global investment community. On the other hand, ArcelorMittal's investment in India could be a game changer.


When you talk about sending a wrong signal, one may argue that ArcelorMittal's opponent, led by the VTB group, is also a foreign investor…


Yes, of course. Both may be international investors. But only one has unrivalled expertise in the steel sector. I don't know much about the other investor, but ArcelorMittal would add great value to the Indian economy and has a track record of managing steel plants for the past 30-40 years. It would be left to those who choose between the two to decide.


Is the Insolvency Act the right solution for recovery of loans?


Right now, there is no other mechanism. Insolvency is the only mechanism. The Insolvency Act can put the economy back on track by getting players who will add value to the industry. The resolution should be aimed at putting the industry back on its feet. Finance Minister Arun Jaitley had said that wilful defaulters should be barred. Those with have a bad track record should not be allowed to bid. That would defeat the purpose of the Insolvency Act. ArcelorMittal has never been a wilful defaulter.

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