Prashant Ruia, director of Essar Steel. (Photographer: Scott Eells/Bloomberg News)

Numetal Shareholders Write To Essar Steel Lenders Offering To Eliminate Ruia Connection

In a bid to make it a more suitable bidder, shareholders of Numetal Mauritius, the VTB Bank-led vehicle to bid for Essar Steel Ltd., have approached lenders offering to buy out Rewant Ruia’s stake.

Bankers and lawyers in the know have confirmed to BloombergQuint that shareholders led by Russia’s VTB Bank have written to the Committee of Creditors in Essar Steel, offering to buy Aurora Trust. Ruia, son of Essar Group co-Founder Ravi Ruia, owns the Trust which is a beneficiary of a trusteeship which holds 25 percent stake in Numetal.

Other investors in the VTB-led group are willing to buy out Rewant Ruia’s stake in Numetal Ltd., Antoine Chemali, senior adviser for Mauritius-based Numetal, told Bloomberg News earlier today. Ruia doesn’t have a board seat in Numetal, Chemali reiterated to Bloomberg.

The effort to dissociate the bid from the Ruia family is likely to ensure its eligibility.
As per recent amendments to the IBC, promoters of large stressed accounts are not allowed to bid for their own assets in the insolvency process.

The Insolvency and Bankruptcy Code allows bidders to change the shareholding structure of their bid after it’s been submitted. But that requires the CoC’s approval.

Lenders will decide on Numetal’s shareholding structure after Satish Gupta, the resolution professional for Essar Steel, presents his opinion on the eligibility of the two bidders, the people quoted above said. ArcelorMittal India, in partnership with Japan’s Nippon Steel and Sumitomo Metal Corp, is the second bidder in the case.

The RP and his adviser Alvarez & Marsal India have outsourced the due diligence process to a foreign firm as both bidders have over 1,000 associated companies each, the people said. The process is currently in its final stages and Gupta will submit his opinion soon, they added. The date for the next CoC meeting is yet to be decided.

Satish Gupta was not immediately available for comment and Numetal is yet to reply to BloombergQuint’s query.

Both Numetal Mauritius and ArcelorMittal’s bids have been under a cloud after the government amended the IBC to stop defaulting promoters from bidding for insolvency assets. ArcelorMittal India was a 29 percent shareholder in Uttam Galva Steel Ltd., another company under the bankruptcy process for defaulting on its debt. The India arm of the Luxembourg-based company had sold its stake in Uttam Galva for Re 1 before bidding for Essar Steel, according to an exchange filing earlier this year.

ArcelorMittal has maintained its bid is eligible as it was never the promoter of Uttam Galva and had no involvement in the management of the company even before selling its shareholding.

In case of Numetal, the connection with the Ruia family is working against the VTB Bank-led bid. Earlier in March, VTB Capital’s Vice Chairman Makram Abboud had told at least two business dailies that the Russian bank was willing to drop Ruias from the shareholding of Numetal if the lenders desired so.