NCLT approves Arcelor Mittal group’s Rs 890-cr resolution plan for Indian Steel Corporation

The Mumbai bench of NCLT has given its nod to the Rs 897-crore resolution plan of AM Mining India Private Limited, a joint venture between Arcelor Mittal, Luxembourg, and Nippon Steel Corporation, for acquiring Indian Steel Corporation, a Surat-based steel manufacturer.

The Rs 897 crore provided in the resolution plan is 32% of the total claims of Rs 2,800 crore admitted by various creditors. However, the amount provided for is more than the liquidation value of Rs 643 crores. The average Fair Value arrived at for Indian Steel Corporation was Rs 1094 crore. The resolution plan was approved by the Committee of Creditors (CoC) by 100% vote share.

The resolution plan

As per the resolution plan of AM Mining India, the financial creditors of Indian Steel Corporation will receive an amount of Rs 810 crore against their total admitted claims of Rs 2709 crore. Operational creditors will receive Rs 12 crore while Rs 75 crore will be infused as capital by AM Mining India in the corporate debtor.

In relation to operational creditors, they shall be paid in the following manner:

a. 100% of admitted claims of the 311 workmen and employees totalling to Rs 2,05,17,237;

b. 100% of admitted claims of the 141 out of 151 operational creditors who have an admitted claim of less than or equal to Rs 50 lakh;

c. Remaining amounts to other operational creditors who have admitted claims of more than Rs 50 lakhs.

d. 100% of (admitted) government dues worth Rs 35,79,769 will be paid on the Effective Date.

In relation to the shareholders, there were no admitted claims as on March 11, 2022. According to the resolution plan, even if admitted claims after March 11, 2022, the aggregate value of assets of Corporate Debtor is less than its liability, therefore liquidation value would be payable to the shareholders, which will be NIL. Accordingly, no payment is proposed to be made to the existing shareholders and exiting paid up capital, whether equity or preference share, shall be reduced to nil and cancelled and extinguished pursuant to capital reduction.

Further, the claims of other creditors (including financial creditors that are related parties), stakeholders and any residual debt to be permanently settled, discharged and extinguished in full and reduced to NIL.

If the Corporate Debtor receives any amount of cash by virtue of a judicial order pursuant to an avoidance application, any interest in the recovery or entitlement of recovery or amount or assets shall accrue to the benefit of the Financial Creditors and Operational Creditors in the ratio of admitted claims. All personal and corporate guarantees are being assigned to the Resolution Applicant as part of the Resolution Plan.

About Indian Steel Corporation

Insolvency proceedings against Indian Steel Corporation was initiated by India Resurgence ARC in October 2021 for the former’s failure to pay an amount of Rs 1,633 crore.

The company owed Rs 2,700 crore to financial creditors, which include India Resurgence ARC (with 71.78% of the admitted claims), PNB (20.11%), J&K Bank (6.06%), IDBI Bank (1.38%) and Union Bank of India.

Indian Steel Corporation produces steel products for auto, construction, home appliances and general engineering segments. With manufacturing Plants at Gandhidham in Gujarat, the company supply cold rolled, galvanized and colour-coated steel to most of India, Europe, America, Middle East and Africa.

This is fourth acquisition by the ArcelorMittal group through the insolvency process in India. ArcelorMittal had earlier acquired Essar Steel in collaboration with Nippon Steel for a sum of Rs 41,000 crore in 2018. It acquired Odisha Slurry Pipeline Infrastructure for Rs 2,350 crore in 2020 as well as Uttam Galva Steel for Rs 4,000 crore in 2022.

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