Farallon Capital May Acquire Rs 1,700-Crore Stake In Essar Steel: Report

Essar Steel's  current debt is Rs 44,000 crore, which also includes working capital.
Essar Steel's current debt is Rs 44,000 crore, which also includes working capital.

New Delhi: Private equity investor Farallon Capital is likely to acquire a 24 per cent stake in Essar Steel for $250 million (Rs 1,700 crore) as part of restructuring of the Ruias-owned firm.

"As part of restructuring of Essar Steel, the financial investor - Farallon Capital - has been roped in to invest $250 million (Rs 1,700 crore) for a 24 per cent equity stake," a source privy to the development said.

The company is expected to utilise the funds from the financial investor to complete its second pellet project in Odisha, the source said.

The current debt of Essar Steel is Rs 44,000 crore, which also includes working capital.

San Francisco-based Farallon Capital has over $20 billion of assets under management.

This is first major investment in the steel industry in the past few years reviving investors' interest in the sector.

When contacted, company sources said "it is inappropriate for us to comment since this is in the realm of speculation".

Essar Steel is one of the first large-sized infrastructure and core sector players to have a package for debt restructuring being considered by lenders at a time when many of the schemes like S4A, SDR and the like have not been able to resolve the lenders' concerns.

During the nine months to December 2016, Essar Steel posted a growth of 60 per cent in steel production to over four million tonnes.

Sources in the banking admitted that the package will also enable banks to regularise the account in their books and upgrade the same to standard category.

The lenders propose to convert part of the debt into cumulative preference shares and will have a 30 per cent stake in the company.

The proposal  will also include standard terms such as personal guarantee of promoter, nominee directors on board, and the likes.

Essar Steel India is one of country's leading integrated steel producers with an annual production capacity of 10 mtpa supported by a 20 mtpa pellet facility.

The state of the art facilities comprise iron-making, steel-making, and downstream facilities, including a cold rolling mill, a galvanising and pre-coated plant, a steel-processing facility, an extra-wide plate mill and three pipe mills with coating facilities.