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The battle for Essar Steel

March 27, 2018 | Expert Insights

Due to the new bankruptcy laws in India, the battle for Essar Steel is now being conducted in the courtroom. The first round bids from both ArcelorMittal and Russian-controlled investment Numetal have been rejected.


Founded in 1998, Essar Steel is one of the leaders in India and abroad in the steel sector. It is part of the Essar Group. The group itself is a conglomerate that controls a number of world-class assets diversified across the core sectors of Energy, Metals & Mining, Infrastructure and services. As of March 21, 2017, the group has over 50,000 employees and has a revenue of $22 billion. Essar Steel’s revenue of $ 2.3 billion.

Essar Steel has an annual capacity of 14 million tonnes. The product includes pipes, plates cold rolling, galvanizing and pre-coated segments. It is India's largest exporter of flat steel with 10 million tons per annum (MTPA) of capacity in India and 4 million tons per annum (MTPA) in worldwide facility. Essar Steel is fully integrated from mining to retail and has specialised plants for value-added steel products like pipes and plates. On 11 June 2012, Essar Steel India commissioned a 19 MW heat recovery power plant at Hazira. In 2016, Essar Steel became the first Indian company to manufacture bullet-proof steel.

The etymology of the company is derived by combining the first letter of the Chairman's and Vice-Chairman's names – Shashi and Ravi Ruia, who are both brothers.

In August 2017, the company was forced to declare bankruptcy. There are now competing bids from companies ArcelorMittal and Numetal for Essar Steel. This would be Mittal’s first foray into steel industry in India after the company’s scion left the country nearly 4 decades ago to build his steel empire.


The battle for Essar Steel has now firmly moved into the courtroom as bids from both ArcelorMittal and Russian-controlled investment Numetal were rejected. This was due to the new bankruptcy laws that have come into force in India.

In accordance to those rules, “promoters”, or controlling shareholders, of defaulting companies are ineligible to take part in auctions under the bankruptcy regime. In fact, a third interested party, the JSW Group, was not even allowed to bid on Essar Steel.  “In this case (Essar Steel), we wanted to re-enter and wanted to give a very good competition... and the creditors would have got more money if we were involved. Then they (CoC) felt that if we were given an opportunity, they would have to advertise in newspapers and will have to call for bids again. People may ask for the data room to be opened. So, we gave in writing to the CoC that we do not need any time. We are willing to participate (on an) as-is basis and with whatever information we have. In their thought process, discretion, they thought they do not want to give a new entrant a chance,” said Sajjan Jindal, chairman and managing director of JSW Group.

ArcelorMittal in a statement commented on the development. The company stated, “ArcelorMittal... continues to believe that our... bid for Essar Steel India... was fully eligible and therefore should have been placed before the Committee of Creditors by the Resolution Professional. However, we received formal notification on March 23 that our bid was deemed ineligible due to the technicality of still being a promoter of Uttam Galva on the stock exchange, even though we had sold our shareholding before submitting our offer. We have, therefore, today proposed a legal challenge to the decision of the resolution professional in the court in Ahmedabad.”

One of the obstacles faced by Numetal is the fact it had Rewant Ruia (son of the Essar Steel Chairman) as its consortium partner but has since signaled that it would drop him if that causes problems with India’s bankruptcy laws.

Meanwhile, the Ahmedabad bench of National Company Law Tribunal (NCLT) has called for another hearing on April 4th 2018. The bench made the ruling after listening to lawyers representing Numetal, ArcelorMittal and Essar Steel's lenders.


The war for control over Essar Steel will usher in a new era of companies operating under the new bankruptcy laws in India. The company presents high stakes for Numetal and ArcelorMittal. The Ruia brothers have put their weight behind Numetal but this would be ArcelorMittal’s first foray into the growing Indian market.