VTB Capital, which has a 40 per cent stake in Numetal, has no operational experience in running the steel business
The domination of three players in the domestic steel
sweepstakes — JSW Steel, Tata Steel
Authority of India — is all set to be challenged with a fourth player entering the game.
The new kid on the block could either be ArcelorMittal
and Nippon Steel
combine or Russian major VTB Capital-led consortium, whose bids, according to the National Company Law Tribunal, will now be referred for consideration by the committee of creditors.
India has largely eluded ArcelorMittal, one of the world’s largest steel
players. Though, the firm had a stake in Uttam Galva Steels that they have sold. Winning Essar Steel
could change that equation. If they win the 9.7 mtpa Essar Steel
assets, the group has said it would invest in the company to increase its capacity to 18 mtpa — closing in on the domestic big boys of the game.
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
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.
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.