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With the deadline to submit bids for Essar Steel now over, the next step is to see if the two bidders would qualify under the Insolvency and Bankruptcy Code to acquire the steelmaker.
The decision rests on accounting and consultancy firm Grant Thornton, which has been appointed by banks to evaluate the bids. Essar Steel faces claims worth Rs 49,000 crore from financial lenders and Rs 23,000 crore from operational creditors. “The (evaluation) process is likely to take at least a couple of weeks,” a person with knowledge of the process told ET.
Lakshmi Mittal’s Arcelor-Mittal and Numetal Mauritius, a consortium backed by Russian bank VTB and Rewant Ruia, a scion of the Ruia family that controls the Essar Group, are the two bidders for the company.
The last date to submit bids was February 12. Essar Steel’s committee of creditors met on Wednesday to discuss the process. Before the bids are opened, eligibility of the bidders needs to be ascertained.
There is considerable buzz in legal circles that the Numetal bid could face hurdles under a new amendment to the bankruptcy code. Section 29A of the code bans promoters of defaulting companies from bidding for stressed assets. Shashi and Ravi Ruia, the founder-promoters of Essar Steel, have been barred from bidding. Rewant is the younger son of Ravi Ruia.
Lenders have also contested Numetal’s recent agreement to purchase a 70% stake in a key pipeline controlling raw materials supply to the Essar Steel plant — this deal with Srei Infrastructure is expected to affect the valuation of Essar Steel.
While the Delhi High Court issued a stay order on the purchase on Tuesday, Numetal has offered to help refinance the “dissenting lenders”.