Arcelor, Nippon seal Rs.42,000-cr deal with lenders of Essar steel

                                                         Arcelor Mittal, the worlds largest steel maker officially set foot in India for the second time and in a much bigger way. It closed a Rs.42,000 crore deal with the lemders of essar steel along with Nippon steel on Monday. Arcelor Mittal in a statement said that it had established a joint venture with Nippon steel corporation known as ArcelorMittal Nippon steel India(AM/NS India), which will own and operate ESIL. Arcelor Mittal owns 60 per cent of AM/NS India and the rest is with Nippon steel. Aditya Mittal is appointed as the chief financial officer (CFO) and Dilip Oomen is appointed as the chief executive officer (CEO). Financial creditors had a claim of Rs.49,473 out of which state bank of india has Rs.13,226 crore. SBI chairman Rajnish Kumar in an event said that “one of the most important observed and commented case has been resolved today. It will boost the banks profitability in the third quarter and be a huge positive for the economy”. Nippon and Essar would allow to make a positive contribution to India’s target to steel making capacity to 300 million tonnes per annum by 2030.

With the acquisition AM/NS has become the fourth largest producer of steel in India and the largest steel company in the western India. It currently has a steel production of about 7.5 million tonnes. It also has iron ore pellet facilities in eastern India with an annual capacity of 14 million tonnes per annum. There are also plans to increase the capacity to 8.5 million tonnes. The resolution plan for Essar had indicated a capital expenditure of Rs.18,697 crore to be implemented in two stages over  period of six years.

CFO Aditya Mittal said that “ This acquisition gives us the opportunity to contribute to India’s expansion I  infrastructure and urbanization  in the coming decades”.

Essar was one of the 12 big ticket cases mandated for resolution of the Reserve Bank of India  under Insovency and Bankruptcy Code (IBC). With the completion there are about six resolutions from RBI’s first list of 12 non performing assets. The average recoveries from these are 56.86 per cent of the admitted claims for financial creditors. For the last three resolutions the average is 42 per cent. The transaction demonstrates how India benefits from the IBC. The positive impact would be felt widely across the Indian economy.