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ArcelorMittal’s India Entry Will Benefit Consumers: Go India Advisors’ Rakesh Arora

Why Go India Advisors’ Rakesh Arora says ArcelorMittal’s takeover of Essar Steel augurs well for consumers but not for steelmakers

A worker climbs a staircase as hot steel bars pass along the continuous casting production line at the ArcelorMittal metals plant in Kryvyi Rih, Ukraine. (Photographer: Vincent Mundy/Bloomberg)  
A worker climbs a staircase as hot steel bars pass along the continuous casting production line at the ArcelorMittal metals plant in Kryvyi Rih, Ukraine. (Photographer: Vincent Mundy/Bloomberg)  

ArcelorMittal’s entry into India following the takeover of the insolvent Essar Steel Ltd. will spur competition and offer more choices for the domestic steel consumers, according to Go India Advisors’ Rakesh Arora.

“It’s become a three-pronged race (among Tata Steel Ltd., JSW Steel Ltd. and ArcelorMittal) and is good for Indian steel consumers because there’ll be enough competition and supply coming on board,” Arora, managing director at the investor relations company, told BloombergQuint in an interview. With Tata Steel pivoting its focus back to India from Europe and ArcelorMittal entering the steel landscape with a big chunk of 10-million-tonne capacity, competition will intensify, he said.

I would say it’s good times for steel consumers.
Rakesh Arora, Managing Director, Go India Advisors

The Supreme Court on Friday allowed ArcelorMittal to pay creditors for Essar Steel, one of the biggest assets facing bankruptcy with a debt of more than Rs 54,000 crore, paving the way for the billionaire Lakshmi Mittal-led company to take over the insolvent steelmaker for Rs 42,000 crore. The apex court also scrapped the National Company Law Appellate Tribunal’s order that gave secured and unsecured lenders equal right over the proceeds. In doing so, the apex court restored the primacy to the committee of creditors.

Though this augurs well for consumers, Arora said incumbent steel producers will face pressure.

“Over the weekend, there was news that (ArcelorMittal) will put up a plant in east India, where a lot of iron mine auctions are happening,” Arora said. “I think you’ll have a very aggressive player who would be determined to increase its market share and to that extent, it doesn’t augur too well for incumbents JSW and Tata Steel.” The world’s largest steelmaker, according to Arora, may raise its capacity by another 5 million tonnes on top of the 10 million tonnes that the Essar Steel acquisition adds.

A big chunk of profitability used to come from auto, which is where ArcelorMittal with its joint venture with Nippon can hurt the incumbents.
Rakesh Arora, Managing Director, Go India Advisors
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That’s also in line with the views of Sajjan Jindal whose JSW Steel is India’s largest steelmaker by capacity at present. Jindal, on the sidelines of World Economic Forum in Davos, Switzerland earlier this year, had told BloombergQuint that the Ruia family—the promoter of Essar Steel—should be a given a “fair chance” to take control of the insolvent company despite legal restrictions.

Jindal had also expressed concern about the entry of ArcelorMittal into India. “We are the largest steel producer in India. And to have one of the largest steel producers of the world sitting next to you, you don’t want it for sure. If they want it, then they should come in and set up a greenfield plant,” he had said.

Watch | Go India Advisors’ Rakesh Arora on ArcelorMittal’s acquisition of Essar Steel and what it means for consumers and incumbent steelmakers...