Analysts say that many of the competing steel players in the country are worried of their financial muscle and their ability to expand capacity once they have a toe hold and are doing whatever it takes to keep them away.
VTB Capital, which has a 40 per cent stake in Numetal, the company which has bid for Essar Steel, has no operational experience in running the steel business. But it has invested equity in steel firms across the world and this will be its first entry into this sector in India. In its initial bid, Numetal had roped in Rewant Ruia, part of the promoter family, as one of the members in the consortium through Aurora Enterprises.
But it had also given an undertaking that the other consortium members were ready to buy out the Ruia stake in Aurora if he was considered ineligible (the law states that promoters cannot bid without paying overdues).
In a revised bid, which has now been considered invalid by the NCLT, it had roped in JSW in a step-down subsidiary in which they will have a 25 per cent stake (the rest is with Numetal Mauritius).
The NCLT’s Thursday decision, declaring the second round of bids not “legally sound”, is not good news
for Vedanta either. The firm has already tasted success by bagging the 1.5 mtpa Electrosteel Steels in the NCLT. By acquiring Essar Steel, too, Vedanta could have become a reasonably sized steel player with 11.2 mtpa under its belt.
Tata Steel is already challenging the position of JSW, which was numero in the steel sweepstakes with over 18 mtpa. That is because Tata Steel has already bagged Bhushan Steel in the insolvency auction and, thanks to that, Tata Steel would see its capacity increase from 12.7 mtpa now to 18.3 mtpa in one go.
Of course JSW, with private equity fund AION, is expected to bag Monnet Ispat & Energy, as they were the sole bidders. This will help them go past Tatas with 19.5 mtpa.
But the Tatas are also the highest bidders in Bhushan Power & Steel, a decision which has been challenged by Liberty House in the NCLT. If the decision goes in favour of the Tatas, they would be clearly ahead of JSW adding in 3 mtpa of additional capacity.
Analysts say even if VTB eventually brings in JSW as a partner in its step down subsidiary Numetal, JSW and the Tatas would have nearly similar capacities in the market.