Lenders to Odisha Slurry Pipeline Infrastructure are favouring ArcelorMittal’s Rs. 2,350-crore cash bid to take over the company over a higher but long-drawn offer from Tamil Nadu-based Thriveni Earthmovers, three people familiar with the bids said.
The company runs a 253-km long pipeline supplying iron ore from mines deep in the hinterland to Essar Steel’s pellets plant in Paradip, Odisha. The pellets are transported to Essar Steel’s main facility at Hazira in Gujarat, meeting half its raw material needs.
This infrastructure for raw material supply is one of the major advantages of the 10-milliontonne Essar Steel plant in Hazira that was awarded to an Arcelor-Mittal-Nippon Steel combine by the Supreme Court, after a prolonged legal battle that ended last month.
“This pipeline is made for the Essar Steel plant. Nobody else has any use for it, so in a way it is surprising that Thriveni has also submitted a bid.
But the ArcelorMittal offer looks more compelling because it’s a full cash bid, unlike Thriveni’s bid with includes a mere Rs. 8 crore upfront cash,” said a person closely associated in the resolution of this case. “I would think ArcelorMittal should emerge as the preferred bidder for the lenders.”
Odisha Slurry owes financial creditors Rs. 3,300 crore, of which Rs. 2,350 crore is the principal amount.
It owes Rs. 2,100 crore to banks, while the other financial creditors include Srei Infrastructure Finance and also Essar Steel.
ArcelorMittal’s offer covers the whole outstanding principal amount. Thriveni’s offer totals Rs. 3,300 crore and covers both principal and interest but the crucial difference is that only Rs. 8 crore of that is upfront cash. While that is just 0.24% of the dues, the remaining payment as per its proposal is spread over five years.
“We are more comfortable with taking the money upfront. Also, there is a doubt about Thriveni’s intentions because it is biding along with Srei Infrastructure which has a history with this company and is also considered close to the previous Essar Steel owners. This deal has direct ramifications to the success of the Essar Steel case and so we would prefer ArcelorMittal,” said another person involved in the resolution process.
In 2015, Essar Steel under the Ruia’s had sold its holding in the pipeline to Srei, a transaction which was objected to by banks who challenged it in the court. The regulator, the Reserve Bank of India, also weighed in against the move.
Bankers are likely to decide on the winner by December 5 as they do not want the Rs. 42,000 crore deal by ArcelorMittal for Essar Steel to be delayed in any way.
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