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Published on : Apr 02, 2018

Vedanta Ltd, an unit of mining group Vedanta Resources plc., based in India announced on March 31, 2018 that it has secured success in the bid to acquire Electrosteel Steels through an insolvency process. The globally diversified natural resource giant was ready to acquire the bankrupt steel firm reeling under massive loans, after the former has been declared as the successful contender by the committee of creditors (CoC) led by State Bank of India (SBI). The bid amount and other specific details for the deal aren’t disclosed as of yet and the information is likely to unfold over the coming months.

Acquisition Subject to Go-Ahead by National Company Law Tribunal

The acquisition bid was made under the Corporate Insolvency Resolution Process under the national bankruptcy code. The company majoring in operations related to exploration, mining, and processing of iron ore announced that it has accepted the Letter of Intent (LoI) on the same day. It further added that the deal is subject to realization from a go-ahead by the National Company Law Tribunal (NCLT).

Other contenders to the bid were Renaissance Steel, Tata Steel, and Edelweiss Alternative Asset Advisors. The insolvency petition was moved by SBI on July 21, 2017 and the resolution process completion is nearing the deadline on April 17 this year.

Deal to Enable Vedanta to bolster its Iron Ore Mining Reserves

Electrosteel Steels has around $150Bn of accumulated soured loans and is considered as one of the country’s biggest loan defaulters. For long, the Kolkata-based steel company has been on the radar of Vedanta’s acquisition efforts, who considered it potentially attractive acquisition to bolster its steel component of the metal business. The Mumbai-based company plans to use the deal to fortify its iron ore mining reserves. Currently, there is an oversupply of steel, with surplus making for exports. 

Of note, the deal follows the opposition made by Renaissance Steel, citing the Insolvency and Bankruptcy Code, to debar Vedanta from bidding.