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British tycoon Gupta’s GFG Alliance buys Adhunik Metaliks in debut India deal
Photo Credit: Reuters

GFG Alliance, the metals group controlled by Britain-based Sanjeev Gupta, said on Tuesday it has acquired Adhunik Metaliks Ltd and associate Zion Steel Ltd for Rs 425 crore ($60 million) in cash.

The transaction marks the GFG Alliance’s entry into India, it said in a statement.

This is yet another success of a bankrupt steel company under the Insolvency and Bankruptcy Code (IBC) after the recent approval by the Supreme Court to billionaire Lakshmi Mittal-owned ArcelorMittal for the acquisition of insolvent Essar Steel in December.

Adhunik owns an integrated steel plant at Chadrihariharpur near Rourkela in Odisha. The plant has a steelmaking capacity of 500,000 tonnes a year, and a 34 MW captive power plant. Zion Steel, its associated steel rolling facility, has a combined rolling capacity of 400,000 tonnes a year. Both plants are currently shut.

The sites produce products for the automotive, energy, engineering and oil and gas sectors.

The deal announcement comes after a top bankruptcy court had asked the Alliance to make a payment by February 14 bringing to close a long drawn insolvency case.

The acquisition was sealed as the resolution plan by Liberty House got a second lease of life last year after the National Company Law Appellate Tribunal (NCLAT) pulled it back from liquidation orders given by a lower court following the failure of payment by Liberty House in its first attempt.

Adhunik’s lenders, led by State Bank of India, had approved Liberty House’s resolution plan in July 2018. However, the plan got delayed due to certain claims by state-run MSTC Ltd. The claims were later rejected by both National Company Law Appellate Tribunal (NCLAT) and the Supreme Court.

Moreover, Liberty House failed to pay Rs 410 crore and said it did not receive the offer letter from lenders for equity shares, which made it difficult for the UK-based company to invest funds.

In July last year, the Cuttack bench of National Company Law Tribunal (NCLT) ordered for liquidation of Adhunik Metaliks Ltd and unit Zion Steel after Liberty House failed to implement its resolution plan to buy both the firms.

GFG Alliance said it plans to revive the steel plants and integrate the facilities into its Liberty Steel Group, which it created last year after consolidating its global steel businesses into one entity.

“Today marks an important milestone in our global steel strategy with the purchase of Adhunik Metaliks and our entry into India – one of the fastest-growing and most vibrant steel markets in the world,” said Gupta, the Indian-born businessman and executive chairman at GFG Alliance.

In October 2019, GFG Alliance had announced the consolidation of its steel businesses into one global entity – the Liberty Steel Group, the 8th largest steel producer in the world outside China, with operations in 200 locations in ten countries.

Gupta, who started off in the trading business, created a global steel empire buying loss-making units across the world.

The steel group has operations in 10 countries and 30,000 employees.

GFG Alliance will introduce its GREENSTEEL model to revive the steel plants - combining steel recycling with low carbon and renewable power sources – to create a more sustainable, competitive operation serving local markets.

Adhunik Group, which employs over 1500 workers, has a debt of more than Rs 5,000 crore.

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