JSW Steel Buys 26% In Numetal’s India Arm To Facilitate Essar Steel Bid

JSW Steel buys stake in Numetal’s India arm to get a foothold in Essar Steel’s resolution process.

Barbed wire sits atop a fence as a conveyor stands at the JSW Steel manufacturing facility in Dolvi. (Photographer: Dhiraj Singh/Bloomberg)
Barbed wire sits atop a fence as a conveyor stands at the JSW Steel manufacturing facility in Dolvi. (Photographer: Dhiraj Singh/Bloomberg)

JSW Steel Ltd. has acquired a 26 percent stake in the India arm of Numetal Mauritius to facilitate its joint bid for Essar Steel Ltd., currently undergoing insolvency resolution.

While the Mauritius-based holding company is the resolution applicant for Essar Steel, the resolution plan will be implemented through the India entity – Nu Metal & Steel Pvt Ltd., two people in the know told BloombergQuint on the condition of anonymity.

On Monday, Numetal Mauritius submitted a fresh resolution plan for Essar Steel under the rebidding process initiated by the committee of creditors. The plan involves the takeover and turnaround of Essar Steel through Nu Metal & Steel, in which JSW Steel will be a shareholder. So, while Numetal Mauritius is the resolution applicant, the plan will be implemented through its Indian special purpose vehicle.

According to the arrangement, JSW Steel will provide loans to Nu Metal & Steel so that it can infuse equity into Essar Steel and extend working capital loans for the resolution process, the two people quoted above said.

“JSW Steel has always adhered to the law and followed all relevant requirements for our bid in this IBC competitive process as an investor along with another eligible Resolution Applicant,” the Sajjan Jindal-led company told BloombergQuint in an emailed statement. “We are a strong eligible player to be part of this process,” it added.

Numetal Mauritius did not respond to an emailed query.

JSW Steel will not get a board seat in Nu Metal & Steel since it is entering in the capacity of only an investor. The board currently has three members – CS Verma, the former chairman of Steel Authority of India Ltd.; Berjis Minoo Desai and Pradyumansinh Manubhai Vala. Verma is the acting chief executive officer of Nu Metal & Steel, the two people quoted above confirmed, while adding that the board may be expanded in future.

The entry of JSW Steel in Numetal’s India SPV is not conditional to promoter issues of the Mauritius-based entity. Numetal Mauritius’ previous bid for Essar Steel was disqualified by lenders as Rewant Ruia, son of Essar Group co-Founder Ravi Ruia, held minority stake in the company.

Numetal has challenged the creditors’ decision at the Ahmedabad bench of the National Company Law Tribunal, stating that since Ruia does not have board representation or management control, his shareholding does not trigger the conditions of Section 29(A) of the Insolvency & Bankruptcy Code. However, to stay relevant in the resolution process, it submitted a fresh bid after lenders invited them to do so.

In the new bid, three other shareholders of Numetal Mauritius bought out Ruia’s minority stake. The other shareholders of the Mauritius-based company include VTB Capital, which owns 40 percent stake and is the largest shareholder; infrastructure company Technopromexport (TPE) and UAE-based Indo International Trading FZCO.