Essar group places bid for Brazil's Petrobras refinery in Bahia: Report

Indian conglomerate Essar Group made a binding offer to Brazil's Petroleo Brasileiro SA to buy the country's second largest oil refinery, two people with knowledge of the matter said on Tuesday.
Petrobras, as Brazil's state-controlled oil producer is known, has received at least two offers for the 323,000 barrels per day Landulpho Alves refinery in Bahia, known as Rlam. The other is from Abu Dhabi's Mubadala Investment Company .

If Essar's bid is successful, it would mark the group's debut in Brazil. Essar has invested roughly $28 billion in assets in energy, infrastructure, mining and services, according to the company's website. It is still unclear if the third pre-qualified group, China's Sinopec, has also delivered a bid.
In a recent note to clients, analysts from Bradesco BBI valued the RLAM refinery, based in the northeastern Brazilian state of Bahia, at $2.5 billion.
According to Petrobras' asset sale rules, the top bidder must enter into an extended round of negotiations, usually lasting several weeks, to finalize contract terms. Depending on the outcome, it may require a final round of bidding which could potentially change the result of the competition, a third source said.
Petrobras declined to comment. Essar did not immediately reply a Reuters request.

India's banking sector at a turning point, thanks to the SC: Morgan Stanley

India’s banking sector may witness a turnaround, after recent rule changes put banks in a better position to get their money back from insolvent companies, according to Ridham Desai, managing director at Morgan Stanley India Co.
A Supreme Court ruling last week not only paved the way for ArcelorMittal’s purchase of Essar Steel India Ltd., an Indian steel mill, but also allowed banks to set the terms of the distribution of sale proceeds among creditors. The move to empower banks “has settled several disputes” around India’s bankruptcy law introduced in 2016, Desai said at a conference in Singapore on Thursday.
“Last week’s judgment may well prove to be an inflection point for the sector,” Desai said, adding that banks previously were not well-placed to recover loans. “I would be fairly optimistic of the banking sector in India.”
Indian lenders, which are saddled with some of the world’s worst bad-loan ratios, are expected to get a boost from increased regulatory oversight of the shadow banking sector as well, he added. The government last week introduced rules to help creditors recover loans due from large shadow lenders.
Meanwhile, authorities have also stepped up surveillance of non-banking financial companies of late, seizing control of another institution, Dewan Housing Finance Corp., which has total debt of about $12.5 billion.
The Mumbai-based analyst is overweight financials by two percentage points versus the MSCI India Index, with a preference for seven financial firms including HDFC Bank Ltd. and ICICI Bank Ltd. The NSE Nifty Bank Index, a gauge of the most liquid and large-cap banking stocks in the country, has risen 15% this year and is near a record high.
Furthermore, the government’s planned capital injection into public sector banks, which account for 65% of the industry, is “the biggest cyclical fix” that will support the sector, according to Desai. In August, the Indian government announced a series of state-bank mergers and a capital injection of 552.5 billion rupees ($7.7 billion) -- its most sweeping bank overhaul in decades -- in a bid to revive the economy.
“You should see signs of a new credit cycle in the next 12 months,” Desai said.

Essar leads India Inc deleveraging; pays off Rs 1.4 trillion: Prashant Ruia

Leading the India Inc in deleveraging through aggressive monetisation of assets, Essar Group paid off Rs 1.4 trillion debt and residual 10-15 per cent will be cleared in the next two quarters, said Essar Capital Director Prashant Ruia.
"In the last three years, I think we were the first to get off the block and actually take some decisive steps towards reducing leverage. It started with our exit from Essar Oil, which was sold to Rosneft and Trafigura (for a valuation of $12.9 billion).

"This was followed by the exit from Aegis, our BPO business. We did a few more exits and used the proceeds from this monetisation exercise to repay about Rs 1,40,000 crore of debt, which is the largest deleveraging by any Indian corporate," Ruia said in an internal chat put on the group's website, asserting that it was in good shape with the topline of portfolio business of over $13 billion or Rs 1,00,000 crore.
While the group deleveraged some of its assets, its flagship Essar Steel was dragged to bankruptcy proceedings by lenders over unpaid loans. Bullish on India's growth story particularly after a series of stimulus measures announced by Finance Minister Nirmala Sitaraman, he said the group will start the investment cycle after its deleveraging exercise is completed.
"We are obviously going to look at growth in new sectors, those will be the more unregulated sectors, which are much more akin to the new economy and which the market perceives differently or more valuable from some of the more traditional sectors," he said, adding the recent measures announced by the government were a 'huge positive' for corporate India.
The changes in the government policies in the last few years have addressed many of the regulatory uncertainties and this would ensure that new investments coming in would not face the same kind of consequences or the risks that some of the old investment had suffered, he said, and asserted that this coupled with domestic demand "still provides for a strong investment rationale to reinvest and to grow and to invest in the country".
After India's economic growth touched 10 per cent in 2010-11 with hopes that growth would sustain in the long term, Essar went about a very large expansion programme of about $24 billion across the capital intensive sectors of oil and gas, power, steel and ports, and completed the same in next few years despite the obstacles, Ruia said.
"What we did not, or could not, foresee was the risk of regulation and judicial intervention that would go on to literally cripple these sectors," he said without elaborating.
Concurrently, the Indian banking system, which had been affected by NPAs and losses, was becoming fairly conservative in lending. This is when the group took a bold call to monetise some of its investments, which were doing very well financially. The objective was to deleverage the group by repaying the banks and reducing debt, he said.
"And I think we did it at the right time because we would have struggled to do so much in the current environment. The premium value that each of our investments fetched is a testament of the quality of the assets we have built and the technology utilised. In fact, the way these projects were conceived was clearly right because they attracted the best value even during a difficult market," he said.
Despite deleveraging, the group still has a fairly substantial portfolio of assets and companies in the five sectors of energy, infrastructure, metals and mining, services and technology, and is confident of growing businesses that straddle these sectors, Ruia said, adding that even as it monetised, as a group Essar attracted FDI (foreign direct investment) of over $32 billion.
Detailing on future plans, he said that despite deleveraging "we still have a fairly substantial portfolio of assets and companies. So in all, we are currently in the four sectors which we have, we are currently doing turnover of about $12-13 billion and we certainly see significant potential value in these sectors".
The assets include oil refinery and retailing business in UK and coal-bed methane (CBM) assets in India.
"And then we are also in infrastructure. We are India's second largest port company. Our port capacity in India is currently if I am not wrong about 13 or 14 pe cent of China so there is a huge potential.
"India has got a vast coastline and a huge potential to provide port services, and we currently have about a 110 million tonnes of capacity but can grow many folds in this sector. So, if you look at this portfolio and all, we still think there's a lot of growth and lot of potential coming out of existing companies," he added.

SC orders status quo on NCLAT verdict in Essar Steel insolvency case

The Supreme Court Monday ordered status quo as of today in the Essar insolvency case.
A bench headed by Justice R F Nariman said the monitoring committee will continue its work till the case is heard on August 7.

The bench was hearing a plea of the Committee of Creditors challenging NCLAT's order of July 4 in which it had approved steel tycoon Lakshmi Mittal-led ArcelorMittal's Rs 42,000 crore bid for the acquisition of Essar Steel after it rejected a plea by the lead shareholder of the debt-laden firm challenging the eligibility of the bidder.
The National Company Law Appellate Tribunal (NCLAT), however, gave operational creditors equal status as lenders in the distribution of the ArcelorMittal's bid amount among the creditors of Essar Steel.
Essar Steel was auctioned under the new Insolvency and Bankruptcy Code (IBC) to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors.

SC orders status quo on funds payout in Essar Steel insolvency case

ArcelorMittal’s entry into India’s steel market could be delayed further after the Supreme Court on Friday ordered the status quo on the distribution of funds among operational and financial creditors from the Luxembourg-based firm’s Rs 42,000-crore resolution plan for Essar Steel India. The apex court also asked the National Company Law Appellate Tribunal (NCLAT) to expedite hearing in the matter.
A two-judge Bench, led by Justice Rohinton F Nariman, was hearing a bunch of petitions moved by the committee of creditors (CoC) of debt-laden Essar Steel. The CoC challenged a direction of the NCLAT asking the resolution professional (RP) to call a fresh meeting of the committee to consider the redistribution of funds among the creditors.

During the last hearing on Tuesday, a two-member Bench of the NCLAT, headed by Chairperson Justice S J Mukhopadhaya, had said it could ask ArcelorMittal to deposit the bid amount of Rs 42,000 crore in a separate bank account or with the Ahmedabad Bench of the National Company Law Tribunal (NCLT) or the appellate tribunal itself.
This amount would have to be deposited by ArcelorMittal on April 23, when it would next hear the case, the appellate tribunal had said. The NCLAT had then said it was not setting aside ArcelorMittal’s resolution plan approved by the Ahmedabad Bench of the NCLT but would look into the issue of redistribution of funds if it found the CoC had treated financial and other creditors in a discriminatory manner.
The observation came after the CoC informed that the lenders, led by State Bank of India (SBI), had decided against a higher payout to Standard Chartered Plc. StanChart had moved the NCLAT, alleging that the CoC had discriminated against it, as it was being offered only 1.7 per cent of its dues from Essar Steel’s resolution plan, while other financial creditors forming part of the CoC were getting over 85 per cent of their dues.
ALSO READ: Essar Steel clocks in highest ever production at 6.8 million tonnes
ArcelorMittal’s Rs 42,000 crore resolution plan for Essar Steel was approved by the NCLT on March 8. In its judgment, the NCLT had observed that though it did not want to change the resolution plan approved by the CoC, it would the lender to reconsider distribution of dues and give 15 per cent of the total offer to operational creditors.
The Lakshmi Mittal-led company has been fighting for the control of Essar Steel for well over 600 days now. The case has seen many twists and turns, including a settlement plan of Rs 54,389 crore made by the promoters of Essar Steel, who offered to pay off the entire debt. The plan was, however, rejected by the NCLT.
ArcelorMittal’s bid, on the other hand, includes an upfront payment of Rs 42,000 crore towards the debt resolution of Essar Steel, with an additional Rs 8,000 crore of capital infusion into the company to support operational improvement, increase production levels, and deliver enhanced levels of profitability. In October 2018, the CoC of Essar Steel had voted to approve ArcelorMittal’s plan and a letter of intent was issued.
ALSO READ: NCLAT can't force us to change approved resolution plan: Essar Steel CoC
Earlier, the Ahmedabad bench of NCLT had sent the first round of bids for Essar Steel back to the RP and the CoC for reconsideration, after it was found that both ArcelorMittal and the then bidder Numetal had not been given time to “cure” their ineligibility. The RP had disqualified both ArcelorMittal and Numetal in the first round. While ArcelorMittal was disqualified as it had not cleared the debt of related company Uttam Galva prior to submission of the bid, Numetal was disqualified owing to Rewant Ruia’s exposure in the company. Rewant is the son of Ravi Ruia, who is a promoter of Essar.

Bankruptcy court clears ArcelorMittal's takeover of Essar Steel: TV Reports

The National Company Law Tribunal (NCLT) approved steel giant ArcelorMittal SA's takeover bid for debt-ridden Essar Steel, television news channels reported on Friday.
ArcelorMittal, which has been engaged in a drawn-out attempt to acquire Essar Steel since 2017, had made Rs 42,000 crore bid for the bankrupt Indian steelmaker.
"We welcome today's pronouncement by the NCLT Ahmedabad. While we will need to review the full written order once it becomes available, we hope to complete the transaction as soon as possible," said ArcelorMittal in a statement.

Essar to deleverage Rs 1.25 trn debt if its Essar Steel offer is accepted

Ruia-family owned Essar Group would deleverage about Rs 1.25 trillion of debt - the largest by any corporate if its offer to repay lenders of Essar Steel in full is accepted, company sources said.
Last week, the Committee of Essar Steel Creditors picked world's largest steelmaker ArcelorMittal's Rs 420 trillion takeover offer over the company promoter's Rs 543.89 billion proposal to pay off all of the lenders' dues.

Essar plans to legally challenge the decision as it believes its offer would ensure 100 per cent recovery for lenders while accepting ArcelorMittal's offer would entail a haircut, sources said.
Sources said Essar Group had so far used $650 million (about Rs 42 billion) from the sale of Aegis US operations, Rs 720 billion from sale of Essar Oil to Russia's Rosneft and partners, Rs 20 billion from sale of Aegis and Rs 24 billion from sale of Equinox to deleverage group debt.
If the offer for Essar Steel is accepted, the deleveraging would total to Rs 1.25 trillion, they said. This is over 85 per cent of total group liabilities.
Essar invested Rs 1.2 trillion -- the highest by any corporate in recent times -- between 2010 and 2015 in building world-class assets in energy, infrastructure, metals and mining, and services sector.
With the completion of its investment and deleveraging programmes, Essar is growing its substantial portfolio of businesses, sources said, adding revenues of Essar portfolio companies presently stand at Rs 800 billion.
Essar, they said, is a leaner, smarter and wiser corporate with a lighter balance sheet.
Insisting that banks that lent to Essar did not lose money, they said loans are being serviced and more than Rs 200 billion has been paid to Essar Steel lenders by way of interest.
The quality of assets created by Essar is attracting aggressive bids from high profile players and will help banks recover their dues without a haircut, they said.
For better management of its portfolio of businesses, Essar has transitioned to a fund-led structure, investing long-term capital into the portfolio companies and holds 100 per cent stake (largest equity holding among peers) in all its investments.
Sources said Essar has brought global investors who have infused over $32 billion in FDI demonstrating the quality of assets it builds and the quality of management they have.
These include stake sale in Vodafone-Essar ($18 billion of value created), stake sale in Aegis in two tranches ($910 million of value created), stake sale of Essar Oil ($12.9 billion of value created) and stake sale of Essar Telecom Tower Ltd ($360 million of value created).
Sources insisted that in each of these cases, the group exited at the right time, on its own terms, at globally compelling valuations. Essar Group, they said, has invested upwards of Rs 2000 billion (of which Rs 1200 billion was invested in 2010-16) in setting up world-class facilities in steel, power, ports and oil and gas.
The assets included 10 million tonnes of integrated steelmaking facility, 20 million tonnes of refining capacity and 3,500-strong petrol pump network (which is now owned by the Nayara Energy), 4,800 MW of power capacity as well as a 465-km transmission network and over 150 million tonnes of ports capacity.

Essar in talks to sell its Equinox office to Brookfield for Rs 24 billion

Essar group is in talks with global investment firm Brookfield to sell its 1.25 million sq ft Equinox Business Park at Bandra-Kurla Complex (BKC) in Mumbai for about Rs 24 billion (Rs 2,400 cr), according to sources.
The group had announced in 2016 that it would sell the property to realty firm RMZ Corp, but the deal could not be concluded.
It is now in the advanced stage of talks with Canada- based Brookfield Asset Management to sell Equinox Business Park, which has four buildings, the sources said.
The deal is expected to close this month for around Rs 24 billion (Rs 2,400 cr), they said, adding that Essar would utilise the entire sale proceeds to repay loans.
The group is reducing its debt by monetising non-core assets.
Once the Equinox deal is completed, the total debt reduction will amount to Rs 775 billion (Rs 77,500 cr) in the current fiscal, sources said.
The group has already reduced its debt by Rs 726 billion (Rs 72,600 crore) following the completion of the Essar Oil sale to Rosneft and a consortium of Trafigura and UCP.
In April last year, Ruias-led Essar Group also announced the sale of its BPO company Aegis Ltd to Singapore-based private equity fund manager Capital Square Partners for an estimated $300 million.
The agreement with the Bengaluru-based RMZ lapsed because the two parties were unable to agree on final terms even after 23 months from the signing of the agreement.
Unlike the housing sector, the commercial real estate, especially the office segment, is performing fairly well and has been attracting huge investment from domestic and foreign investors.
Recently, realty major DLF's promoters concluded the sale of their 40 per cent stake in rental arm DLF Cyber City for nearly Rs 120 billion (Rs 12,000 crore).