ArcelorMittal, one of the world’s largest steelmakers, resolution plan has received approval from the creditors of Uttam Galva Steels Ltd acquired the distressed steel company under the bankruptcy process.
“…the Committee of Creditors of Uttam Galva Steels Limited has approved the Resolution Plan submitted by AM Mining India Private Limited through e-voting process which was held between 17 May, 2021 and 2 June, 2021,” Uttam Galva Steels said in a regulatory filing.
AM Mining India Private Limited is an arm of ArcelorMittal.
In October last year when Uttam Galva Steels was admitted for insolvency proceedings, AreclorMittal had shown interest in acquiring the unit.
Under the plan, ArcelorMittal is likely to pay around Rs 4,000 crore as against claims of around Rs 20,650 crore, of which almost Rs 9,400 crore is owed to financial creditors and Rs 11,255 crore towards operational creditors.
Billionaire Lakshmi Mittal-owned ArcelorMittal emerged as the sole bidder for the debt-laden Uttam Galva Steels under the bankruptcy process in March this year. Other prospective bidders including JSW Steel, Jindal Steel & Power (JSPL) and Vedanta-owned ESL Steel, had submitted expressions of interest for the firm.
A large part of Uttam Galva Steel’s loans was taken over by ArcelorMittal from public sector banks to bid for Essar Steel in 2018. ArcelorMittal had made payments worth Rs 4,922 crore (excluding interest) to secured financial lenders, Uttam Galva Steel’s annual report for 2019-20 said.
In November 2019, Uttam Galva Steels had defaulted to the tune of $6.67 million on its overseas loan or external commercial borrowing (ECB) facility with the total amounting to around $25 million (reduced from $50 million after a settlement). The facility was extended by State Bank of India (SBI) in May 2013.
After a reminder in January 2020 from SBI, Uttam Galva Steel expressed its inability to pay on account of bad financial condition. Subsequently, in March 2020, SBI dragged the firm to the National Company Law Tribunal’s (NCLT), Mumbai bench.
The CoC nod will not be filed with the NCLT for further approval.
In April last year, NCLT had also approved a resolution plan submitted by a consortium consisting of CarVal Investors LLP (Carval Funds) and Nithia Capital Resources Advisors LLP to acquire Uttam Galva Steel’s associate firm Uttam Value Steels.
With 250 acres of land and more than 100 000 square metres of covered shed, the Uttam Galva Steel plant is located near Khopoli, which is 100 km away from Mumbai. As per the firm’s website, the plant has a facility for cold-rolling HR coils, with a capacity of 1,000,000 tonnes per year and annual galvanising capability of 750,000 tonnes. At present, 50% of the firm’s finished steel production is being exported.
The company counts corporates including auto majors such as Mahindra & Mahindra, Bajaj Auto, Piaggio and Tata Motors in its client list.
Last month, the company reported a net loss of Rs 68.7 crore in the quarter ended March 2021, against a net loss of Rs 536.1 crore in the March quarter last year. During the period, sales jumped 62% to Rs 192.2 crore in Q4FY21 as against Rs 118.6 crore Q4FY20. For the full year in FY21, its net loss narrowed to Rs 235.5 crore as compared with net loss of Rs 1,414.2 crore from a year ago. Sales rose 25.5% to Rs 654.2 crore from Rs 521.2 crore in FY20.