Essar Steel Insolvency: Sufficient Firepower To Retain Control, Ruia Says

Will the Ruia family succeed in retaining control over Essar Steel once insolvency process over?

Prashant Ruia, director of Essar Group speaks to Bloomberg in an interview. (Photographer: Scott Eells/Bloomberg News)
Prashant Ruia, director of Essar Group speaks to Bloomberg in an interview. (Photographer: Scott Eells/Bloomberg News)

The Ruia family-owned Essar Group is keen to ensure it doesn't lose control of its indebted unit Essar Steel Ltd. which is currently undergoing insolvency proceedings at the National Company Law Tribunal.

The group has “sufficient fire power to retain control of Essar Steel,” Prashant Ruia, director of Essar Capital told BloombergQuint in an interview.

Essar Steel, which owes nearly Rs 45,000 crore to its lenders, is among the 12 large corporate accounts identified by the Reserve Bank of India for insolvency proceedings. The steelmaker contested the decision in the Gujarat high court and asked for six more months saying it had been close to finalising a debt restructuring process with its lenders. But the plea was rejected.

Also Read: ‘No Scope For Essar Steel To Repay Its Debts For 25 Years,’ Says NCLT

Earlier this month the Ahmedabad bench of the NCLT appointed an interim resolution professional - Satish Kumar Gupta of consulting firm Alvarez & Marsal. The next steps involve constituting a committee of creditors and the finalisation of a resolution plan.

Ruia said Essar Steel’s promoter family will also submit a resolution plan, similar to the debt restructuring plan being worked on before. He said he expects the Ruia family will succeed in retaining control of the company.

Here are the edited excerpts from the conversation.

Are you likely to use the sale of Essar Oil as brownie points to explain to Essar Steel creditors that you are serious of being able to return the debt? Will this benefit you? Because you have been opposing the insolvency process going on in Essar steel.

The culmination of this transaction actually helps us delever our balance sheets significantly and gives us the ability to reinvest in all of our business portfolios. That includes Essar Steel. So our ability to invest funds, equity or whatever is required for our restructuring or resolution is greater now because we had delevered our balance sheets significantly.

As regard to the Insolvency and Bankruptcy Code process, we were not opposed to the NCLT or the IBC process. We were already in a restructuring discussion with the Indian lenders and we felt that the company could have been given six months, which other companies were given, to complete the restructuring. That’s in the past and the chapter is closed. We are in IBC now and we will follow the process required in the IBC. It provides us with a resolution plan which is similar to the restructuring plan which we were earlier talking about.

When and how will this resolution process work out for Essar Steel?

We are not going to talk about the restructuring plan because we can’t. We are now in the IBC process. We have to wait. Whatever has been talked about earlier is now a little bit irrelevant because that restructuring process has been stopped and we are now in a fresh process with the IBC. We will provide the plan in future. It’s not immediate. It will happen as per the timing of the IBC.

Are there some investors, with strategic interest, looking to participate in this resolution process?

I don’t know. And if there are, they will come. There’s no problem. We will provide a resolution plan. We have been through this process in the past, even with the earlier thing and we will continue. I don’t want to talk anymore about this. It’s all in the public domain. If at all the bids come, that’s part of the process. We will provide our resolution plan. We are confident that we will be in a position to provide a better resolution plan. But that’s something time will tell.

Do you envisage losing control of this asset?

That’s a bit of an unfair question. We are in a process now. We will provide a resolution plan. I cannot foresee the outcome today. We have sufficient fire power to do that. The resolution plan we are trying to provide is on the strength of Essar.