ArcelorMittal makes single-biggest recovery under Insolvency and Bankruptcy Code, acquires Essar Steel

Global steel giant ArcelorMittal on Monday said it has completed acquisition of Essar Steel, marking its entry into the Indian steel sector.

The Luxembourg-headquartered company has been eying to enter into Indian steel sector for long and had to give up its plans of two plants - 12 million tonnes each in Jharkhand and Odisha - over a decade back on account of various hurdles.

The deck for acquisition of Essar Steel by L N Mittal-led company for Rs 42,000 crore was finally cleared by the Supreme Court last month.

This is the single-biggest recovery under the Insolvency and Bankruptcy Code (IBC) process.

The company said it has formed a joint venture with Nippon Steel (AM/NS India) to own and operate the debt-ridden firm and Aditya Mittal, President and CFO of ArcelorMittal, has been appointed as its Chairman.

“ArcelorMittal announces that it has today completed the acquisition of Essar Steel India Limited (ESIL), and simultaneously established a joint venture with Nippon Steel Corporation (Nippon Steel), called ArcelorMittal Nippon Steel India Limited (AM/NS India), which will own and operate ESIL,” ArcelorMittal said in a statement.

It said Dilip Oommen of Essar has been appointed AM/NS India’s CEO.

ArcelorMittal holds 60 per cent of AM/NS India, with Nippon Steel holding the balance.

“The acquisition of Essar Steel is an important strategic step for ArcelorMittal. India has long been identified as an attractive market for our company and we have been looking at suitable opportunities to build a meaningful production presence in the country for over a decade,” said Lakshmi Mittal, Chairman and CEO of ArcelorMittal.

Both India and Essar’s appeal are enduring, he said, adding Essar has sizeable, profitable, well-located operations and long-term growth potential for the economy and therefore domestic steel demand are well known.

The transaction also demonstrates how India benefits from the Insolvency and Bankruptcy Code, a genuinely progressive reform whose positive impact will be felt widely across the Indian economy, Mittal said.

“We are also delighted to be embarking on this together with Nippon Steel, with whom we have a trusted, long-term relationship. Our combined strengths and technology will bring many new opportunities which will allow us to make a positive contribution to India’s target to grow steelmaking capacity to 300 million tonnes per annum by 2030, and for its manufacturing sector more broadly,” he said.

AM/NS India manufactures flat steel, plates and pipes mainly at its integrated steel mill with nominal crude steel production capacity of 9.6 million tonnes per year in India. The company also has a significant sales network and manufacturing plants producing pellets, a raw material of steel.

Nippon Steel and ArcelorMittal will bring out AM/NS India’s potential by providing it with their respective business experience and world-leading advanced technologies, so as to promptly implement the resolution plan and realise its further business expansion, said Eiji Hashimoto, Representative Director and President of Nippon Steel.

“For years Nippon Steel has been making direct investments in many countries, including Brazil, the United States, China and ASEAN countries, in areas where we can take advantage of our advanced technology contributing steadily to the industrial development and the enhancement of the self-sufficiency in each host country. We will strive to establish a prominent presence in India, conforming with its policy to increase domestically-produced steel products,” he said.

Essar Steel has quality facilities which provides immediate and substantial production capacity, and the global firm will gain an excellent platform for further growth, across both volume and product quality. This acquisition will provide opportunity to contribute to India’s expansion in infrastructure and urbanization in the coming decades, said Aditya Mittal, President and CFO of ArcelorMittal.

To do this, ArcelorMittal has in place a targeted capital expenditure plan designed to build on our combined management strength, operational expertise, commitment to safe, sustainable steel making and industry leading research and development.

“Through our proven partnership with Nippon Steel, we are confident that AM/NS India will create significant value - for shareholders, our business partners, employees and communities in India,” he said.

AM/NS India is an integrated flat steel producer, and the largest steel company in western India. Its current level of annualised crude steel production is 7.5 million tonnes. It also has iron ore pellet facilities, with current annual capacity of 14 million tonnes per annum.

AM/NS India’s plans include an intention to increase finished steel shipments to 8.5 million tonnes over the medium-term.

This will be achieved by initially completing ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains, and then through the commissioning of additional assets, while simultaneously improving product quality and grades to realise better margins, the company said in a statement.

Besides, there is a long-term aspiration to increase finished steel shipments to between 12 and 15 million tonnes through the addition of new iron and steelmaking assets, in order that AM/NS India can play an active role and fully benefit from the anticipated growth in the Indian steel industry, it added.

Ruias-led Essar Steel was auctioned under the new Insolvency and Bankruptcy Code to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors.