ArcelorMittal Submits EOI For Srei NBFCs In A Last-Minute Entry

ArcelorMittal's last-minute interest has surprised the financial creditors of Srei NBFCs.

<div class="paragraphs"><p>Horse race. (Photo: Unsplash)</p></div>
Horse race. (Photo: Unsplash)

In a last-minute surprise, ArcelorMittal Nippon Steel India Ltd. has expressed interest to buy Srei Group’s non-bank lenders under the bankruptcy law, according to two people in the know.

The expression of interest, submitted late last night, is an unsolicited entry by the Luxembourg-based steelmaker’s India arm, the people told BQ Prime on the condition of anonymity.

Earlier this month, financial creditors to Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd. had restarted the bidding process for two bidders who were participating in the insolvency proceedings.

The bidders—a consortium between Varde Partners and Arena Investors, as well as consortium led by U.K.-based entrepreneur Shon Randhawa—had been given an extended opportunity to submit revised bids after they had failed to submit earnest money deposit previously.

The creditors are yet to decide whether they can allow the entry of a new bidder in the current scenario, the people quoted above said.

CNBC TV-18 first reported about ArcelorMittal’s EOI late Wednesday.

ArcelorMittal has declined to comment on BQ Prime’s emailed queries on Thursday. Srei Group’s administrator didn’t immediately respond.

If a last-minute entry is allowed, there could be legal challenges posed by the other two bidders. This could also prolong the bidding process beyond the timelines envisaged by the creditors, the people quoted above said. To be sure, a decision is still pending.

It is also unclear why a steel company would want to purchase financial services firms under the Insolvency & Bankruptcy Code. According to the first of the two people quoted above, this move could have been prompted by the legal battle between ArcelorMittal Nippon Steel India and Srei Infrastructure Finance over Odisha Slurry Pipeline Infrastructure Ltd.

In August, Srei Infrastructure Finance had approached the Supreme Court, challenging a National Company Law Appellate Tribunal order that allowed ArcelorMittal Nippon Steel India to take control over Odisha Slurry Pipeline under insolvency. The lender has claimed that it was not given the same treatment as other secured creditors in the fund distribution strategy proposed by the steel firm in its resolution plan.

The slurry pipeline is a key component of Essar Group’s steel business, which ArcelorMittal Nippon Steel India had acquired under the bankruptcy law nearly three years ago. The pipeline delivers raw materials to Essar Steel’s Odisha plant.

An EOI, if accepted, will allow ArcelorMittal Nippon Steel to enter the data room for the Srei Group companies. Data room access is allowed to prospective bidders so they may formulate a firm bid under the insolvency proceedings. Such access could arm the steelmaker with inside information in its legal battles, the first person quoted above said.

The insolvency proceedings against the Srei Group NBFCs were initiated in October last year under orders from the Reserve Bank of India. Financial creditors have claims worth Rs 10,727.5 crore against Srei Infrastructure Finance and Rs 31,867.8 crore against Srei Equipment Finance.