Days before second round of bids come in for takeover of Essar SteelBSE 0.41 %, Russia’s VTB Capital-backed NuMetal has snapped a 70 per cent stake in Odisha Slurry Pipeline Infrastructure Ltd (OSPIL), which feeds raw material to Essar’s Paradip steel plant.
NuMetal, the Mauritius-based investment vehicle where Russia’s second largest bank VTB Group is a majority shareholder, will repay all of the about Rs 2,200 crore debt of OSPIL to get the 70 per cent stake from the firm’s current promoter, SREI Infrastructure Ltd, sources privy to the development said.
OSPIL is the largest slurry pipeline in India and is strategic to Essar Steel plant in Paradip. The slurry pipeline transports iron ore from mines in Odisha for producing steel at the steel factory.
NuMetal is competing with ArcelorMittal, the world’s biggest steelmaker, to buy out Essar Steel in the bankruptcy auction currently on. The auctions being done under the new bankruptcy rules are to recover Rs 51,800 crore Essar Steel owes to lenders.
Reached for comments, ArcelorMittal spokesperson expressed confidence of being able to work out a solution to feed the steel plant in case it acquires Essar Steel.
“These are important issues for Essar Steel India but we are confident that in the event we are successful we will find successful outcomes to ensure the steel plant is able to operate smoothly and efficiently,” he said.
While the spokesperson did not offer any comment on the acquisition, a source close to the company saw the move by NuMetal as “an attempt to put obstacles in the path of ArcelorMittal pursuing Essar”.
“But it won’t work,” the source said.
The source said of the two consortia of bidders for Essar Steel, ArcelorMittal is clearly by far the more experienced operator when it comes to the steel and mining industries.
“They are not going to be bullied out of the game by these sort of tactics. In the event that they are successful, they are confident that a solution would be found,” the source said.
“The creditors are surely not going to be forced to select a company because they are trying to take control of the pipeline. Furthermore it’s not even clear at this point in time that this tactic will work given the matter is subjudice.”
Sources, quoted above for NuMetal acquiring the pipeline company, said lenders of OSPIL had previously objected to sale of the asset on grounds that under the loan agreements, any sale required prior approval. They had also issued recall notices.
OSPIL has now told the group of dozen banks that it has now arranged funds to repay the entire debt, they said adding the company has written to the lenders offering to repayments latest by April 30.
NuMetal is the source of funds for such repayment.
The repayment would remove all hindrances for the purchase under of pipeline by NuMetal, giving it full control over the asset.
OSPIL yesterday wrote to all its 12-13 lenders, saying it has “received in-principle commitment for refinancing the entire indebtedness of the company”.
OSPIL said it expects to be able to make repayment of all dues on or before April 30.
The company asked the lenders to confirm immediately the amount which would be due to them as of April 30, sources said.
It also asked the lenders to confirm that they would immediately release all security interest over the assets of the company once payments are made.
Prasanta Patnaik 
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