After Essar Steel, ArcelorMittal now eyes EPC Constructions

2018-10-30

Oct. 30, 2018 - ArcelorMittal, which has emerged the top bidder for Essar Steel Ltd after a lengthy battle, has now set its sights on another Essar Group company undergoing insolvency resolution, a person aware of the development said. The world’s largest steel producer is expected to submit its bid for EPC Constructions (earlier called Essar Projects India Ltd) by 12 November, the person cited above said on condition of anonymity. A wholly-owned subsidiary of Essar Projects Dubai, EPC Constructions is involved in building infrastructure projects, power plants and refineries, among others.

The person said ArcelorMittal has completed due diligence on the company and used the data room open to bidders. Officials of ArcelorMittal have also visited the engineering division’s plant in Surat, he said.

“ArcelorMittal wants to use the whole gamut of services provided by this company as it would help it in its future expansion in India,” the person said.

He said EPC has an in-house engineering and project management division, a procurement division as well as a fabrication facility, which will benefit ArcelorMittal.

A spokesperson for ArcelorMittal declined to comment. An email sent to the resolution professional of EPC Constructions remained unanswered till the time of publishing this story.

Lenders had declared loans to EPC a non-performing asset (NPA) on 31 December 2014, and issued a demand notice on 8 November 2017, documents available with the National Company Law Tribunal (NCLT) showed. The banks then asked EPC’s corporate guarantors to repay the loan. The rupee term loan was guaranteed by Essar Investment Ltd and the working capital loans were guaranteed by Imperial Consultants and Securities Ltd.

According to documents on EPC’s website, under the insolvency resolution process, the company has received financial creditor claims of ₹9,048 crore, of which the resolution professional has admitted ₹7,037 crore and the rest is under verification. Lenders include Central Bank of India (₹1,054 crore), UCO Bank (₹1,011 crore), IDBI Bank (₹933 crore), Exim Bank (₹884 crore), Corporation Bank (₹722 crore) and Suraksha Asset Reconstruction Company (₹642 crore). Interestingly, the highest claim—₹1,753 crore—has been filed by the company’s parent—Essar Projects Ltd, Dubai—and the claim is undergoing verification at the moment.

EPC was referred to the bankruptcy court by IDBI Bank and was admitted under the Insolvency and Bankruptcy Code (IBC) on 20 April 2018.

On 25 October, more than 92% of creditors of Essar Steel India Ltd (ESIL) had voted in favour of handing over the company to ArcelorMittal. The same day, in a final effort to keep its ownership of the company, promoters of Essar Group submitted a proposal to the CoC, agreeing to pay a total of ₹54,389 crore to all creditors of Essar Steel. It includes settling claims of operational creditors as well as employees.

“ESIL’s resolution professional, on behalf of the CoC, has issued the company with a Letter of Intent stating that the company has been identified as the successful applicant,” ArcelorMittal said.

If Essar Steel finally goes to ArcelorMittal, the company will jointly own and operate ESIL in partnership with Nippon Steel and Sumitomo Metal Corp. (NSSMC), Japan’s largest steel producer and the third-largest steel producer in the world. ArcelorMittal and NSSMC expect to finance the joint venture through a combination of partnership equity (one-third) and debt (two-thirds).