VTB will compete with Lakshmi Mittal for Essar Steel

The battle for the Essar Steel smelter between the Russian bank VTB and the world's largest metallurgical group Mittal Steel entered the hot phase.
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The battle for the Essar Steel smelter between the domestic bank VTB and the largest metallurgical group of the world Mittal Steel has returned to the level of 2006. Then the Indian Lakshi Mittal managed to eliminate the Russian steel oligarch Alexei Mordashev in the fight for the European steel crown. Now he intends to do the same with the head of VTB Andrei Kostin.

VTB joined the fight for the company Essar Steel India Ltd., which owns one of the largest steel plants in India. The company's value is estimated by insiders at $ 6 billion. In addition to the impressive capacity (9.6 million tons of steel per year), the plant "has" huge debts - $ 8.1 billion. Currently, the company's operations are stopped, it is in a state of bankruptcy. Accordingly, the decision on the transaction is accepted by the bankruptcy trustees.

Corporate Mask

VTB acts on the Indian market under the "corporate mask" - the company Numetal Mauritius, where it controls about 70%. About Numetal Mauritius, almost nothing is known. In Western media it is defined as SPV (special purpose vehicle) - a project company, created for a specific task. The same goes for the registration of the company - the Republic of Mauritius. This island nation, located in the southwestern Indian Ocean, about 900 km east of Madagascar, has become a fashionable area recently for the creation of offshore special purpose structures. It is especially popular with Indian corporate structures with a complex structure. In particular, in this island jurisdiction is registered the corporate center of the conglomerate Essar, which owns the metallurgical plant being sold. The owners of the conglomerate are the billionaire brothers Shashi and Ravi Roya.

The son of the last Revan Rui, along with the still unknown partners, owns the minority package Numetal Mauritius. In other words, VTB's current bid to buy a metallurgical plant was filed with the participation of its current owners. This is VTB's second experience with the Rui brothers. In 2017, VTB Capital (the investment division of the bank) organized for Essar Group the sale of its oil refining division - Essar Oil Limited. One of the world's largest refineries was sold to Rosneft and the Trafigura-UCP consortium (at 49.13%) for $ 12.9 billion. This was the largest foreign investment, both for Russia and for India.

The goal of selling Essar Oil Limited was to unload Essar's balance sheet from huge debts. The current operation should save the same company from bankruptcy. The obvious strategic nature of bankruptcy raises questions from the agency that deals with the sale. His legal advisers do not advise him to accept the application of Numetal Mauritius, as it contradicts the new Indian bankruptcy law, which prohibits the sale of bankrupt enterprises to companies that have overdue credit commitments. From a formal point of view, Numetal Mauritius, of course, does not. But lawyers proceed from the fact that participation in the company of old shareholders means trying to keep their business new packaging and with new shareholders. But if everything is more or less obvious with the interests of the Rui family, then what goals VTB pursues is unclear. Hardly Kostin wants to become a metallurgist. In the market, no one doubts that the state banker conducts the purchase of the plant in the interests of "third parties".

We can repeat ...

The names of these persons are not yet known. It is possible that this is the Russian steel magnate Alexei Mordashov. And it's not just that he recently met with Russian President Vladimir Putin without any special reason. Lakshi Mittal, a British steel tycoon of Indian descent, claims to buy Essar Steel, rose to the world league after buying up assets in Kazakhstan. Lakshi Mitall in 2006 managed to bypass Alexei Mordashov at a sharp turn in the battle for the company Arcelor - the second largest steel company in the world. Then Alexey Mordashov agreed with the shareholders of the Luxembourg steel company Arcelor on merger with the assets of Severstal. It was assumed that in the new company Mordashov would receive 32% of the shares and de facto would control the largest steel producer in Europe. The 2006 deal was already approved by the Kremlin, but Lakshi Mittal intervened.

In a company with the largest western investment bank Goldman Sachs, he managed to host a hostile takeover of Arcelor, which became part of the Indian steel industry. Then it was primarily about establishing control over the technological center of the global steel industry and a huge base of patents and know-how. The failure of this deal was the first obvious proof that Russian oligarchs (and even Kremlin support) are only waiting in London stores and real estate agencies. But not the market of real quality assets.

Mittal goes to the minister

The acquisition of Essar Steel India is a completely different story. This time it is about gaining access to India's huge and fast-growing market. But Lakshi Mittal is again in the fighting post. This time in alliance with the Japanese corporations Nippon Steel and Sumitomo Metal, which have their views on the growing market in India. And its own promotion strategy.

According to sources from Bloomberg, Essar Steel is now estimated at $ 6 billion, and its overdue liabilities - at 8.1 billion. But the amount, as well as the state of the market situation, few people do not care. The future of India is assessed, with which, according to strategic investors, the country is in order. But not everything is in order with the application from ArcelorMittal. Although ArcelorMittal recently reported a record profit in 2011 and managed to restore its investment rating, consultants pay attention to the Indian company Uttam Galva Steels Ltd. It has overdue loans, and until recently, 29.1% of it belonged to the ArcelorMittal concern. And then suddenly it ceased to belong: this package was "sold" to other shareholders of the company for a symbolic amount. The "strategic" (if not to say feigned) nature of such a deal is obvious to all. But, according to recent reports, which come from India, local regulators have forgiven their former countryman this "financial engineering".

And Lakshi Mittal himself met with the Minister of Finance of the country and discussed the prospects of restoring the solvency of the enterprise, which he claims, and then made a public statement in which he promised that the application for a purchase will not be filed. Such a meeting in such a country means, as the sports commentators would say, "a serious bid to win." Representatives Numetal Andrew Kostin in turn had to justify the fact that Numetal Mauritius has its own detailed development plan for the project. What will be the battle for steel this time, it is unclear, but it is obvious that the potential owners of the enterprise are in no hurry to show their face. So the banker Andrei Kostin will have to keep his face.