Lakshmi Mittal's journey a year after he came home to buy Essar Steel

It has been a mixed bag for the firm he renamed AMNS India, and while the pain of the downturn and the pandemic has subsided, other issues remain

It’s been a year since Lakshmi Mittal came home with the acquisition of Essar Steel (renamed AMNS India) through India’s new insolvency law, after fighting a famously protracted legal battle that played out in different courts of India. But it’s not just the entry that was dramatic, the year that followed was riddled with one of the biggest challenges as the Covid-19 pandemic struck the Rs 42,000 crore acquisition.

AMNS India began on a strong note after the acquisition was completed on December 16, 2019. In January, the joint venture set production records with run rate 7.4 million tonnes, an increase of 40 per cent since the time of due diligence for the acquisition towards the end of 2017; run rate earnings before interest, taxes, depreciation, amortisation (EBITDA) were $600 million, higher than what they were when the acquisition was completed.

Then Covid-19 hit India and a nationwide lockdown was imposed towards the end of March, that sent the industry into a tailspin as user industries shut down and supply chains got disrupted. AMNS India’s performance in April got impacted. It has, however, bounced back since and is operating at full capacity.

“The bid for Essar was made in 2017-18 when the upcycle in steel was just starting, but then there was a deep downcycle even before Covid-19 started. Most of the benefits of the acquisition for Arcelor Mittal were qualitative in the early days. Despite trying for many years, they had not been able to enter India in a major way,” pointed out Icra senior vice president, Jayanta Roy. 

 

A late entrant to the India market, Mittal has “high” aspirations for AMNS India, as he mentioned in his inaugural letter to employees. There is a clear plan to expand and increase footprint in India.  

So even as the pandemic played out, Mittal reached out to heads of states in which it operates, virtually. Discussions were held with Gujarat Chief Minister, Vijay Rupani, in July and it was conveyed that a capital outlay of over Rs 20,000 crore had been set aside towards enabling infrastructure for an expanded capacity; the plant at Hazira in Gujarat is undergoing an expansion of rolling capacity of 7.3 million tonnes to 8.6 million tonnes and the focus is to double capacity.

Discussions were also held with Odisha Chief Minister, Naveen Patnaik. AMNS India has a pellet plant in the state, which too, is undergoing expansion.

With steel in a stronger upcycle, experts believe, now is the right time to go back to the drawing board with expansion plans. 

“They have a sizeable asset and are looking to ramp up capacity. With an improvement in steel prices and demand conditions, the ramping up is happening just at the right time,” said Roy.

Alongside, there is an endeavour to make AMNS self-reliant. Critical assets – such as a slurry pipeline, power plants, port facilities – that are ancillary to Essar Steel were not part of the resolution process. Much of the earlier part of the year was spent in trying to secure some of the assets.

In March, therefore, AMNS India completed the acquisition of Bhander Power Plant in Hazira from Edelweiss Asset Reconstruction Company. Bhander, a natural gas-based thermal plant with an installed capacity of 500 megawatt (Mw), was acquired for AMNS India captive requirements.

Around the same time, ArcelorMittal India (AMIPL) won the Thakurani iron ore block with estimated reserves of 179.26 million tonnes, as part of a move to secure AMNS India’s raw material requirements.

But some assets have run into legal roadblocks like the slurry pipeline owned by AMNS India slurry pipeline owned by Odisha Slurry Pipeline Infrastructure (OSPIL) which landed in the National Company Law Tribunal (NCLT). 

 

AMIPL submitted a resolution plan which was approved by the Cuttack Bench of NCLT, but challenged by Srei Infrastructure Finance, a financial creditor in the National Company Law Appellate Tribunal (NCLAT). A decision is awaited. 

Meanwhile the Ahmedabad Bench of NCLT in November recognized the charges for use of slurry pipeline for running Essar Steel as a going concern as corporate insolvency resolution process (CIRP) cost and ordered AMIPL to pay Rs 1,300 crore. The NCLAT, however, has stayed it.

A tussle in Gujarat High Court is also on as AMNS has sought transfer of Hazira port licence from the Ruias of Essar group. A petition against the government of Gujarat and Essar Bulk Terminal (EBTL) is being heard.

“These ancillary units were always going to be challenges and though they are unlikely to create any immediate issues, but control of these assets may be important if operations are ramped up,” a person familiar with developments said. EBTL, though, has assured that it would meet any enhanced requirement by the steel plant.

But a year on, ArcelorMittal is still trying to settle the acquisition right.

AMNS India

• Crude steel capacity of 9 million tonnes
• Pellet plant capacity of 14 million tonnes

Assets secured during the year:

• Bhander power plant
• Iron ore licence for Thakurani mine with approved production capacity of 5.5 million tonnes per annum
• Resolution of OSPIL-owned slurry pipeline approved by NCLT; challenged by Srei Infrastructure