ArcelorMittal to sell entire 29% stake in Uttam Galva at Re1 a share
06 February 2018
ArcelorMittal will sell its 29-per cent stake in Uttam Galva to its co-promoter, the Miglani family's Sainath Trading Company, for Rs1 a share against the average share price in the past six months of Rs24 a share.
With its exit from Uttam Galva, ArcelorMittal will cease to be promoter of a stressed company in order to become eligible to take part in stressed asset auctions in the country.
ArcelorMittal will cease to be a promoter of Uttam Galva, a bank defaulter undergoing insolvency proceedings, and become eligible to take part in auctions for stressed assets in the country.
It is, however, not known whether the share sale will materialise any time soon, or even if the transaction takes place ArcellorMittal will become eligible to bid for future sale of stressed assets.
ArcelorMittal is planning to make a strong pitch as eligible bidder for distressed assets but is held back by its investment in bankrupt Uttam Galva.
Reports quoting Uttam Galva promoter Ankit Miglani said the proposed transaction is tentatively set for tomorrow (7 February) or before, when around 41,327,931 shares held by ArcelorMittal Netherlands BV, translating into a 29.05 per cent stake, will be transferred. The company has informed the State Bank of India, its lead banker, and the market regulator.
The share acquisition price per share of the proposed transaction would not be higher by more than 25 per cent of the stock's average market price for a period of 60 days, as per a stock exchange notice.
On Monday, Uttam Galva shares closed 4.5 per cent down at Rs19.55 a share.
ArcelorMittal bought the stake in Uttam Galva in 2009 after having failed to put up greenfield plants in India and is marked as a promoter in stock exchange disclosures.
According to Section 29A of the IBC, a person shall not be eligible to submit a resolution plan if such person, or any other person acting jointly with such person, or any person who is a promoter or in management of such person, is an undischarged insolvent.
This prohibits promoters or sister concerns of companies with non-performing assets (NPAs) of more than a year from taking part in auctions.
ArcelorMittal had, however, said the IBC regulations were intended to prevent defaulting promoters whose own investments had failed and were insolvent from buying those same assets out of bankruptcy. "We are a widely recognised and highly credit worthy international investor and, hence, do not believe that this amendment should prevent ArcelorMittal from bidding for distressed steel assets in which we have had no prior involvement," it had said in November.
It had also said that they held a non-controlling minority shareholding in Uttam Galva, had no representation on the board of directors, nor any influence on management decisions. "As such, we are not a promoter of Uttam Galva. Therefore, there is no objective reason for ArcelorMittal to be prevented from bidding."
Uttam Galva was on the second list of the Reserve Bank of India's defaulting companies and was in discussions with lenders for restructuring, as its debt to equity ratio shot up to 31.1. Subsequently, the restructuring failed, and the central bank referred it to the bankruptcy courts.
Until now, ArcelorMittal has done due diligence of Bhushan Steel, Bhushan Power & Steel, and Essar Steel plants. But it withdrew from the bidding process for Bhushan Power & Steel sometime back and said it had not put in a bid for Bhushan Steel. On Sunday, the company said it has not bid for Bhushan Steel, but was interested in future opportunities. The bid deadline for Essar Steel is 15 February and ArcelorMittal is expected to take part.
As for Uttam Galva, JSW Steel is interested in making a bid for its Maharashtra plant as it is close to its own plant and Uttam Galva is its customer.