Indian court approves ArcelorMittal’s bid for Essar Steel

India’s National Company Law Appellate Tribunal has approved ArcelorMittal’s resolution plan to take over debt-ridden Essar Steel on July 4.

The decision came after the NCLAT dismissed an appeal by Essar Steel’s founders, Shashi Ruia and Ravi Ruia, saying India’s supreme court had cleared the takeover bid and therefore it could not consider the appeal.

On April 12, 2019, the supreme court stopped a disbursement of funds to Essar Steel’s creditors, pending the outcome of the NCLAT hearing, which occurred after the National Company Law Tribunal had approved ArcelorMittal’s plan on March 8, 2019. 

The NCLT was created under the Companies Act of 2013 to handle corporate civil disputes arising under the act, whereas the NCLAT hears appeals against decisions of the NCLT.

ArcelorMittal’s plan includes an upfront payment of Rupees 420 billion ($5.7 billion) to resolve Essar Steel’s debt and a further Rupees 80 billion to improve the steelmaker’s operations and raise production.

Upon the NCLAT’s decision, ArcelorMittal said it needs “to review the full written order to understand any implications on completion of the transaction.” The steelmaker had said it expected the transaction to be finalized over Q3 2019.

Similarly, market sources in India told S&P Global Platts they expected ArcelorMittal to take control of Essar Steel as early as August 2019.

The plan includes a capital expenditure of Rupees 186.97 billion to be implemented in two stages over six years.

The first stage will raise Essar Steel’s production of finished steel products to 6.5 million mt/year, while the second stage will boost that output to 8.5 million mt/year by 2024.

— Clement Choo and Ashima Tyagi