Narayanan Vaghul voices his crucial view on the pertinence of the ArcelorMittal's bid
Essar Steel bids from ArcelorMittal and Numetal - a company 40 percent owned by Russia's VTB group and 25 percent by a trust where Ravi Ruia’s son Rewant is a trustee – await clearance from law firms on eligibility. But Narayanan Vaghul, a former independent director and chairman of the audit and risk committee of ArcelorMittal, has asserted that if ArcelorMittal is found ineligible, it would send a wrong signal to the global investment community.
Keeping in mind, ArcelorMittal's bid for Essar Steel, Mr. Vaghul noted, “I was quite thrilled that ArcelorMittal made a bid. I was on the board until last year. I am happy that they are planning to do something in India. They have been wanting to for more than a decade now. I was on the audit committee of ArcelorMittal and they have brought down net debt from $21.8 billion to $10.1 billion since 2012 when the steel industry was going through a difficult time.”
It is to be noted that the Chairman and Chief executive of ArcelorMittal – Lakshmi Mittal met the Finance Minister earlier in the day today and re-asserted their commitment for the Essar bid. Speaking on the sidelines of his meeting, he said, “we have put in a well-planned bid for Essar Steel. I think we can that we can create value in Essar Steel.” He also added that his group has a good experience with the Public-Private Arrangement in Punjab.
ArcelorMittal is one of the largest steelmakers in the world, spread across several continents. This merger would bring to the industry is not just professional expertise but also research and technology. It is interesting to note, whether there an indication, that the eligibility test that ArcelorMittal is being put through is because of its stake in Uttam Galva? “I don't know the legal aspects. But I was on the board when ArcelorMittal made the investment and it's minuscule compared to the turnover of ArcelorMittal, which is around $68 billion. Plus, they were not on the board or part of the management. I would like to say that if they are found ineligible on this technical ground, then it would send a very wrong signal to the global investment community,” explained Mr. Vaghul.
On the point about sending a wrong signal, it can be argued that ArcelorMittal's opponent, led by the VTB group, is also a foreign investor, elucidating on this, Vaghul said, “Yes, of course. Both may be international investors. But only one has unrivaled expertise in the steel sector. I don't know much about the other investor, but ArcelorMittal would add great value to the Indian economy and has a track record of managing steel plants for the past 30-40 years. It would be left to those who choose between the two to decide.”
It’s important to note here that one of the right solutions for recovery of loans can be the Insolvency Act. “Right now, there is no other mechanism. Insolvency is the only mechanism. The Insolvency Act can put the economy back on track by getting players who will add value to the industry. The resolution should be aimed at putting the industry back on its feet. Finance Minister Arun Jaitley had said that willful defaulters should be barred. Those with have a bad track record should not be allowed to bid. That would defeat the purpose of the Insolvency Act. ArcelorMittal has never been a willful defaulter,” he said.
ArcelorMittal's investment in India would send the right signal to the global investor community about foreign investment in India. They have plants in every continent —North America, South America, Canada, Africa end even in China — and huge technical and managerial expertise for operating such assets. Banks, keen on the recovery of dues, would look at people who can efficiently run the company.
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