Tag: JSW

‘Talks on With Adani Group Over Tajpur Port’: Bengal Govt’s ‘U-Turn’ Deepens Mystery

Five days after chief minister Mamata Banerjee’s fresh investment call, industries minister Shashi Panka said discussions with Adani are continuing.

Kolkata: The mystery surrounding the fate of the Tajpur deep sea port development project in West Bengal deepened as the state government, in an apparent U-turn, said that talks were still on with the Adani Group.

“Clarifications and dialogues are going on between Ms Adani group and the state government,” commerce and industries minister Shashi Panja said on Sunday, five days after chief minister Mamata Banerjee gave a fresh investment call for the Rs 25,000 crore project at the state’s flagship business event, Bengal Global Business Summit (BGBS).

“The proposed first deep sea port at Tajpur is ready. You can participate in the tender. It will attract an investment of about $3 billion, meaning Rs 25,000 crore,” Banerjee had said.

When journalists asked Panja if her statement contradicted that of the chief minister, she said, “I am speaking on behalf of the honourable chief minister.”

Adani Port and Special Economic Zone (APSEZ) head Karan Adani received a Letter of Intent from the state government in October 2022.

A lack of consistency between the statements of the state government and the Adani Group regarding the status of the projects over the past few months has given rise to speculation.

While the state government had on several occasions said they were waiting for the Adani Group to do their part regarding necessary permissions from the Union government, the Adani Group had said at least three times that they were awaiting the Letter of Award (LoA) from the government to start with the other processes.

However, the chief minister’s surprise announcement on November 21 prompted many to speculate if this was the fallout of a political tussle between Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) and Mamata Banerjee’s Trinamool Congress (TMC) involving the latter’s MP Mahua Moitra’s allegedly anti-Adani’s interests.

Banerjee’s public backing of Moitra the very next day strengthened the speculations. “What she (Moitra) used to say inside, she will not be saying outside,” Banerjee had said at a party event. Moitra is known for regularly accusing the Modi government of giving undue favours to the Adani Group as part of a nexus.

After Banerjee’s call for participation in the tender, senior BJP leaders in the state, including Lok Sabha MP Dilip Ghosh, alleged that it was the Adani Group that backed out of the project because of Moitra’s role.

On Sunday, Panja said, reading out from a written statement, that the Adani group was “given a provisional LoI” and that the work for getting permissions required from the Union government ministries like shipping, home, defence and external affairs “are on.”

“The Ministry of Home Affairs has given a conditional security clearance and has made some observations. We are working with the Adani Group regarding those observations and have asked for some clarifications. These communications are going on currently,” she said.

The absence of the Adani Group at the BGBS triggered speculations over whether the group had “snubbed” the government because of the ruling party’s political attacks alleging a “nexus” between the business group and the BJP.

While Panja asserted that the government had sent invites to the group for the business summit, a senior government official, who was unwilling to be identified, said, “Invite was sent as part of formality. The extra efforts that we usually make to ensure top industrialists’ presence were not made for the Adani Group this year.”

After Panja’s announcement, CPI(M) central committee member Sujan Chakraborty took potshots at the government. “The statements of Panja and the chief minister are contradictory. They (the TMC) are sometimes speaking up against Adani to hide their own nexus. But at the end of the day, she (Banerjee) cannot go beyond what Delhi (BJP) tells her to do,” he said.

An Adani building in Australia. Representative image. Photo: Wikimedia Commons/RegionalQueenslander, CC BY-SA 4.0.

‘Important for both’

According to Kolkata-based business and political observers, the Tajpur port project is important to both the state government as well as the Adani Group.

It is the biggest industrial project the state government has taken up during Mamata Banerjee’s 12-year rule – along with the proposed coal mine at Deucha-Pachami – but the work related to Tajpur port has progressed more than the coal mine project.

The government, to smoothen the process of the port development, had also scrapped the state’s only proposed solar project – the Rs 750 crore project to develop a 125-megawatt (MW) capacity solar park.

The state had received Rs 25 lakh from the Union government for preparing a detailed project report for the solar park. The report was complete and the process of securing an international loan had progressed. However, in 2021, the state government decided to prioritise the Tajpur project and handed over the 532-acre plot at Dadanpatrabar earmarked for the solar park to the Tajpur port project.

The government has also expedited the development of industrial corridors, including one from Tajpur to Dankuni near Kolkata.

On the other hand, concession agreements being signed between governments and private industries for the development, operation and maintenance of different new ports and terminals in the country are usually for a period of 30 years, whereas in some cases a period of up to 50 years is being considered. The Adani Group had in August argued in favour of 50-year concession periods.

In that context, the 99-year concession period offered by the state government “is lucrative,” according to a senior business journalist who did not want to be named.

Adani Port’s brochure published in August 2023 highlighted that the 99-year concession given in Tajpur port development was the first instance in India. “The Adanis hurriedly pulling out of such a project out of a political controversy does not make sense,” the journalist said.

The Adani Group bagged the LoI after emerging as the highest bidder, defeating another major business group, JSW.

A senior bureaucrat said, requesting anonymity, that the chief minister’s announcement was “shocking and surprising” as there was no hint of such a measure even a day before.

“The chief minister may have been upset that no one from the Adanis came to give updates on the project. But I totally understand if the Adanis did not send any representative to avoid being asked by the press on the Mahua Moitra episode,” the bureaucrat said.

Senior journalist Avijit Ghosal, however, suspects the chief minister may have miscommunicated what she intended to convey on November 21.

“Mega infrastructure projects like this do not happen overnight and the LoI is nearly the beginning of a very long drawn process of negotiations and a string of agreements,” he told The Wire, adding that the chief minister should have clarified her statement.

“What the chief minister may have meant is that while the Adanis remain the anchor investor in this project, there would be multiple sub-projects with wide investment opportunities for India Inc. She probably invited other industrial houses for wider investment. What she perhaps omitted was providing an explanation for her one-line statement. That’s the explanation that the state industries minister is providing now,” said Ghosal.

The Adani Group will invest Rs 15,000 crore in the project, while the associated infrastructural development cost has been projected at another Rs 10,000 crore. On November 21, the chief minister mentioned Tajpur as a Rs 25,000 crore project.

Adani’s Acquisitions: Why India Needs to Keep Track of the Costs

As the Adani group accumulated assets rapidly, its methods have raised concerns about corporate governance that have wider political economy implications for the country.

The first part of this article, ‘Adani’s Acquisitions: The ‘Inorganic Strategy’ Behind the Purchase of Gangavaram Port’, can be read here, and the second part, ‘Adani’s Acquisitions: Inside the Company’s Growth Machine’ may be read here.

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Bengaluru: The Adani Group is in a hurry.

Over the last nine years, not only has it expanded within its existing verticals like ports, it has also diversified into a clutch of new businesses like media, defence, drones, solar panel manufacturing (straddling the value chain from polysilicon to solar installations), electrolysers, data centres, urban renewal projects, airports and more.

This game plan brings the Reliance template to mind. Mukesh Ambani built up capacity and then signed a set of deals with big names and brought his debt down to zero.

If Adani rapidly builds a network of assets and boosts its market capitalisation in verticals like ports, it could then offload a chunk to some global port management company, retire debts with the proceeds, and become a zero-debt company.

In the handful of interviews Gautam Adani has given, he has never been asked, or spoken, about his underlying strategy for expansion. The Wire asked the Adani Group’s official spokesperson to comment on this characterisation of its business plans but he chose not to in a brief response (see below) to our questions. 

Chasing growth, the group has relied heavily on ‘inorganic growth’, acquiring concessions and firms to rapidly add scale. Apart from acquisitions, the group is also one of the big gainers from the BJP-led Narendra Modi government’s decision to create a bankruptcy resolution process which, instead of working out a bespoke rehabilitation package, simply puts the stressed assets up for sale.

Along the way, as instances like Krishnapatnam and Gangavaram show, the group’s acquisition drive has benefited from state action or support. This backing comes with large rewards for the group – but also risks. On the one hand, it accumulates assets rapidly. On the other, the perception of what Sharmila Gopinath of the Asian Corporate Governance Association calls the “lock step between the government and Adani”  deepens concerns about corporate governance and creates the risk of further ESG (‘environmental, social and governance’) downgrades, reducing the group’s access to cheap money. There is also the spectre of legal risk. Some of these acquisitions – like Gangavaram – have already been challenged in court. As the group finds itself under international scrutiny, more cases might be filed. “If the concessions are taken away, his whole ecosystem will come under pressure,” a South Indian port executive told The Wire on condition of anonymity.

These costs, however, are nothing compared to the risks to India’s economy. 

The bigger costs of the state-backed acquisition model

While working on this report, The Wire met promoters who were worried about becoming acquisition targets.

“I have just won a PLI,” said the managing director of a South Indian company, referring to the government’s production-linked incentive scheme. “I am worried that the resultant higher profile might make me an acquisition target.”

As a result, firms are seeking strategic investors as a hedge against a hostile takeover by Adani. GMR, for instance, has sold a 49% stake in its airport business to France’s ADP. “They are owned by the French government and so, it is hard to bully them,” said a senior executive in GMR’s airports business. Even the executive whose firm bagged the PLI is scouting for strategic investors.

A second big cost lies in the monopolisation that accompanies such untrammelled expansion. In 2021, after acquiring Gangavaram, Adani announced an additional charge of $3/tonne on Capesize vessels offloading only a part of their cargo at Adani-owned Dhamra, Krishnapatnam and Gangavaram before moving, with a reduced draft, to other ports. The decision was decried by critics as an attempt to monopolise traffic in these large vessels.

In Gangavaram itself, Adani is facing complaints about the abuse of market position – like a hike in its coal tariffs for the Vizag Steel Plant, with predictable impacts on the bottom line of the state-owned steel maker. 

Coal importers who baulk at the terms set for using Gangavaram can only use the Vizag port now. “Our fear is that [someone] will next use the fear of pollution to shut down coal handling at Vizag port,” said the owner of a small coal importing firm in Vizag. At the same time, with coal stocks at Gangavaram rising steeply, locals in Gangavaram village told The Wire about heightened pollution, breathing trouble and are now demanding that the government relocate their village.

The Wire asked Adani to comment on these allegations. In its emailed response, however, the company didn’t answer the question.

There are other costs and consequences too. Once Adani acquired Krishnapatnam in 2020, large users of the port – like JSW – got worried. The steel-maker scrambled to acquire Chettinad Cements’ port business. “If the JSW-Chettinad deal happens, Krishnapatnam port will be the big loser because 5-6 million tonnes of cargo which are currently shipped by JSW through Krishnapatnam will shift entirely to the terminals acquired by JSW,” Business Line quoted a port industry executive tracking the deal as saying just before the deal was finalised. “JSW is under strategic pressure to have its own terminals for handling group cargo without being at the mercy of Krishnapatnam port with attendant pricing risks… The strategic urgency for JSW acquiring Chettinad has thus grown after Krishnapatnam was bought by Adani. If it happens, Krishnapatnam will lose revenue of at least Rs 150 crore,” he said.

Shortly after the JSW-Chettinad deal went through, there were income tax raids on Chettinad Cements in December 2020.

Representative image of JSW’s office. Photo: JSW website

And then, there are the national costs – like concentration risk for the economy. “You cannot have all eggs in one basket,” said a relative of Gangavaram promoter D.V.S. Raju. “Help a hundred companies grow. Or the whole sector will get into trouble.”

In the post-Hindenburg world, this fear is coming true. “Ports and airports are cash guzzlers,” said the port executive. “As Adani freezes its capex, what happens to its plans of expanding its ports? What are the national implications of the country’s biggest port operator not adding fresh capacity?”

The short-seller’s report adds another complication as well. If Adani’s cash crunch worsens – and he is compelled to sell some of these concessions – there is no telling who might pick up critical Indian infrastructure like ports. As Forbes reported recently, Vinod Adani had pledged shares with Russia’s tainted VTB Bank.

And then, there is the political economy question of cronyism, both at the national and state levels. “Over the last four years, we have seen a sea change,” said the head of an Andhra Pradesh-based renewables company. “Companies are being forced to [exit]. This has especially picked up since the 2019 election.” Like many The Wire spoke with for this story, he did not want to be identified.

In the past, governments have doled out favours to preferred companies. We are now seeing something new. The charge now being made by businessmen and the opposition is that ruling parties are helping their preferred firms annex their peers.

According to them, this represents a malign evolution in the use of political power in India – and transcends existing definitions of crony capitalism. This also suggests that the problem is not of help being given to just one or two corporate groups. “We will see many more large acquisitions backed by political parties in the next 10 years,” said a former member of the state planning board for Andhra Pradesh.

As the social contract between the people and political parties comes under strain, it is vital that institutions tasked with regulating the corporate sector do the job they are supposed to.  So far, however, there is little sign of that. 

(M. Rajshekhar is an independent reporter studying corruption, oligarchy and the political economy of India’s environment. He is also the author of Despite the State: Why India Lets Its People Down and How They Cope. Reporting for this project was supported by Pulitzer Center)

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Appendix

Adani’s Response to The Wire’s Questionnaire

Thank you for approaching us, please find herewith our response to your query as appended :

These allegations are false and baseless. It is unfortunate that, despite not being true, such allegations are being rehashed. 

Over the decades, the Adani Group has proven its expertise in designing, building and managing world class infrastructure projects that bring about primary and secondary economic growth and also employment and benefits to the community. In addition to greenfield projects, the Group has also relied on strategic acquisitions to expand its business. Our business expansion decisions emerge from a careful evaluation of the state of the potential acquisition, its prospects for growth and its synergies with our existing operations, through fair, transparent and well-established business processes. These are business transactions handled professionally, with mutual respect and trust. 

Responding to these allegations, Mr GV Sanjay Reddy, Vice-Chairman of the GVK Group, has publicly stated his views (Link 1, Link 2). 

It would only be fair that you reach out to the DVS Raju Family too for clarifications in this regard. 

Thanx & Regards

Spokesperson – Adani Group
Roy Paul

 

 

 

India Needs to Notice How 3 Development Projects Could Alter Goa’s Forests Forever

As many as 30 projects which threaten India’s ecological fibre were discussed and cleared virtually, without an opportunity for proper scrutiny, assessment, appraisal and deliberation.

On the night of November 1, 2020, at least 5,000 Goans assembled near the level crossing at Chandor, a village in South Goa. From 10.30 pm to 4 am they demonstrated against the double tracking of the South Western Railway line. The night reverberated with chants and songs – an ode to the strong collective vision of Goa’s rich ecology.

The double tracking of the railway line is one of the three infrastructure projects that the government is determined to implement in an ecologically fragile Goa.

The three projects that threaten the forests in and around Bhagwan Mahaveer Wildlife Sanctuary and Mollem National Park in Goa are: the four laning of the NH4A, double tracking of the railway line and the laying of a 400kV transmission line. These projects will lead to the felling of around one lakh trees in Goa and Karnataka, of which a minimum of 59,000 trees will be felled in Goa.

The railway and highway projects were two of the 30 projects cleared by the Ministry for Environment, Forests and Climate Change (MoEF&CC) during the lockdown. The clearances were discussed and granted virtually, without an opportunity for proper scrutiny, assessment, appraisal and deliberation, in a clear violation of a meaningful engagement with the procedure established by law.

The process for granting environmental clearances in India is dependent upon the nature of the project, and accordingly referred to the National Board for Wildlife, the Forest Advisory Committee and the Expert Appraisal Committee. Further, there has been no cumulative impact assessment of all the three projects on the region. A fragmented assessment does not give the real picture of the impact that the region is going to take, and is mere lip service to the process of environmental impact assessment (EIA).

The government, and its concerned ministries have blatantly ignored the growing concerns regarding these projects passing through Goa’s sensitive protected regions, and the inevitable damage that will be caused by them. They have gone as far as alleging that the protestors are “outsiders” or being misled for political reasons.

The projects are touted as being in the best interest of Goa, while the naked reality is that neither are these projects by the government of Goa, nor are they for the residents of Goa. The projects are merely to facilitate vehicles of corporates to convert Goa into a coal transportation hub.

Boosting coal handling capacity

The Mormugao Port Trust (MPT) in Goa’s Vasco is one of India’s major ports connected to Maharashtra and Karnataka through the South Central Railway and the NH17A, NH17B and NH4A highways. Its berths are primarily used for coal and iron ore transfer and handling.

According to the Ministry of Shipping/Indian Port Associations Sagarmala master plan for MPT, the current coal handling capacity is 12 mtpa (million tonnes per annum). Of this, JSW transports 7.5 mtpa and Adani transports 4.5 mtpa.

The document states that MPT has to develop additional coal handling capacity to fulfil future coal demands in the region. The MPT railway system facilitates coal movement to parts of the hinterland. Currently, there is only one line that connects the port to the hinterland, limiting the coal movement capacity to 15 mtpa. JSW coal terminal and Adani coal terminal move 19 mtpa of coal and affiliated cargo.

The railway line has to be doubled to boost that figure.

The Adani terminal at MPT (berth number 7) moves coal from MPT to other parts of India through the existing South Western Railway, as well as the NH17B highway. The NH17-B highway connects to the NH4A highway which moves through the Mollem region.

This image shows how Adani moves coal. Photo: adaniports.com

On the November 5, 2020, the Adani Group tweeted refuting claims of it having business interests in the infrastructure projects in Goa.

Whose interests are the projects serving?

So whom are the projects really benefiting? Why were they granted clearance as “projects in public interest”?

The MPT expansion was first fought against by the Vasco fishermen in 2016.

Also read: Meet the Mega-Project That Goans Fighting ‘Dirty Coal’ Are up Against

MPT now stands as a gate of sorts for bringing in coal from Australia and Indonesia, and to transport it to the rest of the country. According to environmental activists, the cost of moving coal through Maharashtra and Karnataka would lead to an increase in the price of the coal, and Goa, therefore, is the convenient option.

The master plan also states that there are multiple coal power plants projected to come up in the near future in Bellary, Hospet, Belgaum, Hubli-Dharwad, Kudgi, Solapur, Bijapur, Gulbarga, Vijayanagara and Raichur. Both the public and private sectors have huge investment plans for these coal-based power plants. Currently, MPT witness a handling of around 12 million tonnes of coal and the master plan aspires to increase its capacity to 51 million tonnes by 2035.

Goa already meets more than enough of its power requirements from existing power sources, then why the need for a transmission line that has already led to the felling of 2670 trees?

Goa’s environment and power minister Nilesh Cabral has released a white paper on Goa’s electricity consumption, after a series of delays, which states that “historically, the load requirement for domestic consumers in Goa is more than double the load requirements of both commercial and industrial consumers put together.”

This statement contradicts the 19th Electric Power Survey wherein the electricity demand projections for Goa for the year 2021-2022 show that domestic consumptions is just 26.91%, whereas the commercial and industrial consumption is 65.63%. The remaining 7.46% accounts for public lighting, irrigation, and so on.

With the laying of the transmission line, Goa will have double the power that is its requirement.

It is clear that this is not for the people of Goa, it is for high tension industries. Moreover, if an EIA for the transmission line was conducted, it is not publicly available, which is a violation of the fundamental right to information under Article 19(1)(a) of the Indian constitution.

The forest clearance proposals for the two transmission lines and the approach road to substation, for which stage-1 forest clearance was granted on April 29, 2020, were on the Ministry of Environment, Forest and Climate Change’s web portal PARIVESH, but they have now disappeared.

Moreover, the felling of 2,670 trees for the substation for the transmission line at Sangod is in clear violation of the Supreme Court’s order in 2015 wherein it directed that “No Objection Certificate(s)” will not be issued in Goa for the conversion of any land of over 1 hectare that has natural vegetation with tree canopy density in excess of 0.1. The area of land cleared for the substation is 11.8 hectares and its canopy density is 0.7.

The clearances granted by the National Board for Wildlife to the railway and highway project are currently under challenge in the High Court of Bombay at Goa.

The fragmented implementation of the larger coal hub project is shrouded in secrecy at every stage, with the Major Ports Bill 2020 being the final curtain act.

Goa is a favoured holiday destination for most of India. However, the fact that its environmental framework is at great risk has been convenient to ignore for mainstream media.

(With inputs from the Amche Mollem Campaign and Gabriella D’Cruz, a conservation biologist based in Goa)

Veera Mahuli is a lawyer and artist based in Goa.

Five Trapped Underground After Quake Hits Polish Coal Mine

A rescue operation was carried out to rescue miners trapped in the Borynia-Zofiowka-Jastrzebie mine after an earthquake of 3.4 magnitude took place.

Warsaw: Rescuers were battling on Saturday to reach five coal miners who were trapped nearly one kilometre underground in southern Poland after an earthquake.

The 3.4 magnitude quake hit the Borynia-Zofiowka-Jastrzebie mine on Saturday morning, trapping seven miners at a depth of about 900 metres (2,950 feet), state mining office WUG said.

Two had been reached by mid-afternoon and rescuers were thought to be within 150 metres of the remaining five, the chief executive of mine owner JSW, Daniel Ozon, told a news conference.

The two rescued miners were in a “relatively good condition” and could walk unaided, he said.

There were about 250 people working in the mine at the time of the quake, JSW said. The missing miners were from a team of 11 that were drilling a new tunnel. Four had managed to escape by themselves.

The rescue operation was earlier hampered by high levels of methane, which reached a concentration of up to 58%.

A spokeswoman for JSW, the EU’s largest coking coal producer, said earlier it would only be possible to check if installations supplying oxygen to the mine had not been damaged in the area of the quake once rescuers got there.

Katarzyna Jablonska-Bajer added that the quake had destroyed communications lines.

Prime Minister Mateusz Morawiecki, who was due to reach the mine later on Saturday, described the rescue operation as very difficult. “I still hope that the remaining five miners will be saved”, he told reporters.

WUG said the quake was of a type that can occur in coal mines after the removal of deposits builds up tensions in the rocks.

Polish news agency PAP said family members of the missing miners had gathered at the mine and were being counselled by psychologists.

(Reuters)

ArcelorMittal, Numetal Ineligible to Bid for Essar Steel, Finds Audit Report

If Essar Steel’s lenders accept the report, bids by both hopefuls could be rejected at the meeting of the committee of creditors on Friday.

Mumbai: A forensic audit report by Kroll, a corporate investigations and risk-consulting firm, has said both ArcelorMittal and VTB Bank-backed Numetal were ineligible to bid for Essar Steel.

The audit report said there were several regulatory cases pending against both the bidders. If Essar Steel’s lenders accept the report, bids by both hopefuls could be rejected at the meeting of the committee of creditors (CoC) on Friday.

On Tuesday, the CoC had opened the financial bids. Arcelor’s bid was higher than Numetal’s and required lenders to take a 40% haircut on the stressed asset’s debt.

A source who attended the meeting in Mumbai said the Kroll report was taken on record by the lenders. It would be taken up for discussion in the next meeting. Kroll examined 2,000 companies across the world and in over 80 jurisdictions connected to both bidders and promoters.

Some of the lenders are of the opinion that despite the report both companies should be allowed to bid so that there is more competition in the next round of bidding. “There will be some pending case against almost any company in the world,” said a source.

The lenders have also asked their lawyers, Shardul Amarchand Mangaldas, to provide them options in the next meeting after taking the Kroll report into account. A source said lenders will decide internally after consulting their legal teams and come prepared with options.

During the CoC meeting on Tuesday, lenders also discussed an offer letter from JSW Steel, which wants to bid solo for the company in the next round. The additional offer, lenders felt, would increase the value of the company. For now, JSW has teamed up with Numetal to bid for the company.

But before that the lenders could ask for bids of second round to be opened, said sources. Vedanta has also made an aggressive bid. Both Numetal and ArcelorMittal spokespersons declined to comment on the Kroll report.

A source said the lenders are also not happy with the offers made by ArcelorMittal and Numetal as both bids sought high haircut from the banks.

Essar Steel owes close to Rs 440 billion to banks while the offer from ArcelorMittal was to take over debt worth Rs 303 billion and Rs 2 billion to unsecured lenders. Both JSW Steel and Vedanta have won one company each in the ongoing bankruptcy process and lenders are keen that bids from both companies are permitted in the next round.

While JSW Steel has emerged as the highest bidder for Monnet Ispat, Vedanta is the highest bidder for Electrosteel Steel. Both Monnet and Electrosteel Steel had defaulted on loans and were sent to the National Company Law Tribunal (NCLT) by banks for debt resolution.

Last week, the NCLT Ahmedabad bench remanded the first round of bids made by Numetal and ArcelorMittal to the resolution professional concerned and the CoC, and pointed out that payment of overdue amount was a cure for resolution applicants who were promoters of non-performing assets for more than a year.

The sale of shares and declassification did not absolve them of their responsibility, it had observed in the case of ArcelorMittal. However, the CoC was not to be influenced by the tribunal’s observations and was asked to take an independent view on eligibility.

Numetal is likely to challenge the NCLT order in the National Company Law Appellate Tribunal, and banks would prefer to wait for the outcome.

By arrangement with Business Standard.

Battle for Essar Steel: JSW Plans to Go Solo If Fresh Bids Are Allowed

There is no express bar on the right of committee of creditors to invite a fresh bid.

JSW Steel may go it alone as the committee of creditors (CoC) for Essar Steel decides to consider a fresh round of bids altogether.

JSW Steel is pointing towards a part of the NCLT order, which was uploaded on Saturday, which says “in the option no. 1, it has been suggested to initiate a new process for inviting bids from all interested parties (starting with initiation of new expression of interest) and follow the entire process as per new request for proposal as approved by the CoC, which were not considered as viable and appropriate by the CoC keeping in view of the time constraint, while in our humble view to be more sound reasonable and legally transparent… therefore, we feel while remanding back the matter to the CoC for reconsideration of the resolution plan and resolution applicant, to look at option 1 as per the deliberation made in the CoC meeting dated March 21, 2018…”.

Seshagiri Rao, joint managing director and chief financial officer, JSW Steel, said, JSW Steel had evinced interest earlier to bid for Essar. But the CoC decided to invite bids from only shortlisted expression of interest (EoI) which ruled it out citing time constraint.

Subsequently, JSW partnered NuMetal in a step-down subsidiary, Nu Metal & Steel. Asked if JSW would bid alone if the CoC did decide to invite a fresh round of bids and not restrict to the shortlisted EoIs, Rao replied in the affirmative and said that is what we wanted. “We would be able to submit the bids on time,” he added.

The committee of creditors is expected to meet shortly to take a call on the bids after Thursday’s order by the Ahmedabad bench of the National Company Law Tribunal (NCLT). Some suggested the meeting could even take place on Monday.

The CoC has a host of issues to consider.

The NCLT bench has directed the resolution professional to place before the CoC the first round of bids from NuMetal and ArcelorMittal.

However, whether the CoC will give Numetal and ArcelorMittal 30 days to cure their bids or invite a fresh round of bids during the time has been left to the CoC.

The 270-day stipulated date for Essar was April 29, but the NCLT bench has excluded the period from March 20 to April 19, the day of the order, from the mandatory 270-day window of the insolvency process, as laid out by the IBC (Insolvency and Bankruptcy Code). With this, the deadline now stands extended by a month.

The order said the CoC did not follow the prescribed procedure to afford reasonable opportunity to the resolution applicants to make overdue payment to remove disability of the resolution applicants or to make good of the disability.

Section 29A (c) refers to a provision that disallows a person from submitting a resolution plan if he has an account that has turned a non-performing asset (NPA) for more than a year unless he makes payment of all overdue amounts with interest thereon before submission of a resolution plan.

The proviso says that if the resolution applicant is ineligible under clause (c) of Section 29A, the resolution applicant shall be allowed by the CoC such period, not exceeding 30 days, to make payment of overdue amounts, in accordance with the proviso to clause (c) of Section 29A.

The CoC may also deliberate on whether declassification by ArcelorMittal in Uttam Galva and KSS Petron will make it eligible for Essar.

The bench has observed ArcelorMittal will have to pay overdue amounts to lenders on account of Uttam Galva Steels and KSS Petron to become eligible. “Mere sale of shares and declassification as promoter after the companies have gone into default cannot absolve them of responsibility,” the tribunal observed.

An ArcelorMittal spokesperson said, “We are currently reviewing the order and will comment further in due course as appropriate.”

However, while directing the resolution professional to place the first round of bids before the CoC, the bench has said it did not wish to rule on the issue which is required to be considered by the CoC and not be influenced by the observations of the bench.

ArcelorMittal had sold its shares in Uttam Galva and L.N. Mittal in KSS ahead of the Essar Steel bid to become eligible. Uttam Galva is an NPA for more than a year as is KSS Petron, a subsidiary of KSS.

In KSS Petron, L.N. Mittal, chairman and chief executive officer of ArcelorMittal group, (through holding companies) exercised negative control, whereas in the case of Uttam Galva, ArcelorMittal Netherlands (AM Netherlands, a connected person of AM India) exercised positive control on Uttam Galva.

In the case of KSS Petron, the views of resolution professional advisors, Cyril Amarchand Mangaldas (CAM) and Darius Khambata differed.

CAM’s view was that negative control also constituted control for the purposes of testing under Section 29A(c). In Khambata’s view, however, negative control for the purposes of Section 29A(c) and accordingly KSS Petron did not constitute ground for disqualifying AM India.

The court observation however stated that Section 29A did not distinguish between positive and negative control.

NuMetal’s legal counsels believe the order provides scope for the company to change the shareholding in order to qualify for the bid whereas ArcelorMittal will have to pay dues.

NuMetal had mentioned in its first bid that if Aurora Enterprises, in which Rewant Ruia is the ultimate beneficiary, was found ineligible then it could be dropped. If Ruia is dropped then the question of payment of overdue amount may not arise.

“What the NCLT order is trying to say is that whatever ineligibility we have found in the plan for 29(A), as per 30(4) we have to give them 30 days’ time to rectify the same. In case of NuMetal, now where the bidders have only changed, as per the order they can now rectify their disability as per 29(A). In case of ArcelorMittal, it appears that the court wants the payment to be done,” one of the CoC counsels told Business Standard.

By arrangement with Business Standard.