It’s been a tough year for India’s fourth-richest man, who has struggled to return to his roots.
When Lakshmi Mittal left India for a vacation across Asia more than four decades ago, he did not plan to stay in Indonesia and lay the foundation for a steel empire that spans the globe and generated $5 billion in profits last year. Yet that is what he did, even as a string of efforts to establish himself in India’s steel market failed — until now.
Mittal’s global giant ArcelorMittal is finally nearing the end of a year-long battle to break into India with the $5.9 billion acquisition of Essar Steel India Ltd. The Indian steel-maker was put on the block after its lenders approached the court to recover about $7 billion in dues.
The forced sale of the 10-million metric tonnes a year mill has hit numerous roadblocks, including rules that compelled Mittal to shell out an extra $1 billion to clear the dues of two firms where he held some stake. He had to reportedly sell his holdings in one of them for ₹1 a share. Perhaps the biggest hurdle was posed by Essar Group’s Ruia brothers, who lost control of the mill after a regulator pushed it into bankruptcy court. Challenges from Essar Group, rival bidders and some creditors have seen ArcelorMittal make dozens of trips to court since an initial bid in February 2018 — dwarfing its five-month-long campaign for Arcelor SA in what was the industry’s biggest merger.
Setting precedents
The legal wrangling landed in the Supreme Court last year, setting precedents for India’s two-year-old bankruptcy law. The drama also sounded a warning to other founders, who till recently were accustomed to an ineffectual court system and walking away from debts without serious consequences.
Without doubt, India’s insolvency process is reshaping its steel industry. Five companies from the sector were among 12 large debtors — the so-called dirty dozen — ordered into bankruptcy court in 2017 by the regulator in a clean-up of one of the world’s worst piles of bad debt. Those cases are, in turn, impacting the law.
On Friday, Mittal looked close to sealing the deal after a bankruptcy court approved ArcelorMittal and partner Nippon Steel’s offer for Essar Steel.
The Ruia’s Essar Group said that its $7.8 billion offer remained the most compelling and expressed confidence in its legal validity. Standard Chartered Plc, the third-biggest lender to the mill, has filed a plea in an appeals court opposing the approval of ArcelorMittal’s plan as a substantial part of its dues will remain unpaid, according to people with knowledge of the matter. For Mittal, that likely means victory still remains a legal challenge or two away.