State Bank of India withdraws insolvency plea against Uttam Galva Steels

State Bank of India (SBI) on Thursday withdrew an application filed with the National Company Law Tribunal (NCLT) to send Uttam Galva Steels (UGSL) for debt resolution under the Insolvency and Bankruptcy Code after ArcelorMittal, one of the former co-promoters, paid UGSL's dues worth Rs 61 billion to the lenders.

With this, UGSL becomes the first company where lenders have received their entire dues after an application was filed with the NCLT for debt resolution under the bankruptcy code.

A top executive of UGSL said ArcelorMittal India, a subsidiary of ArcelorMittal, would now hold the debt of the company instead of the Indian lenders. ArcelorMittal India will also receive the collateral, which was held by the banks as security against the loans.

UGSL, along with 27 others, was in the second list of companies identified by the Reserve Bank of India for debt resolution. But SBI’s petition as a financial creditor against UGSL was not admitted by the NCLT as ArcelorMittal was fighting a legal battle over its eligibility to bid for Essar Steel.

SBI's counsel on Wednesday told the NCLT in Mumbai that all dues of the company were cleared by ArcelorMittal and, therefore, most of UGSLs' accounts with the bank had become standard.

ArcelorMittal paid off UGSL’s dues on October 17 after the Supreme Court (SC) ordered it to do so. In February, just a few days before the bidding for Essar Steel, ArcelorMittal had sold its 29 per cent stake in UGSL to the promoters, the Miglani family, for Rs 1.

The company’s earlier stand was that as it had sold its stake in UGSL and KSS Petron, both bank defaulters, it was eligible to bid for the assets going through the IBC process. On October 3, the SC rejected Arcelor's earlier stand and gave two weeks to ArcelorMittal and Numetal to repay their dues to banks to become eligible to bid for Essar Steel. While ArcelorMittal paid its dues, Numetal did not.

The LN Mittal company then offered Rs 420 billion for Essar Steel as against its dues of Rs 490 billon to emerge as the highest bidder for the company.

The financials of UGSL, meanwhile, deteriorated. Its revenues are down to Rs 1.1 billion for the quarter ended September, from Rs 19.38 billion for the quarter ended September 2015. In the same period, from a profit of Rs 0.16 billion, UGSL made a loss of Rs 5.81 billion for the quarter ended September 2018. Its shares closed 5 per cent lower at Rs 11.18 per cent on Thursday.

ArcelorMittal will own and operate Essar Steel along with Nippon Steel and Sumitomo Metal Corp from Japan, the third-largest steel producer in the world.