‘Far-fetched to call us Ruias’ proxy’

MUMBAI: VTB, one of Russia’s largest banks, which is leading a consortium that has bid for Essar Steel, trashed the buzz of it being a proxy for the Ruia family who founded the beleaguered metal company. This comes amid speculation that the consortium Numetal — in which VTB is a 40% owner but counts one of the Ruia family members as shareholders — may be disqualified from bidding for the bankrupt steelmaker.
Questions have been raised on the consortium’s bid eligibility as Rewant Ruia, son of Essar Steel’s co-founder Ravi Ruia, is a shareholder and bankruptcy rules prohibit a person connected to the defaulting company from participating in the process. Rewant, through Aurora Enterprises, owns 25% in the consortium. Numetal is vying with a joint venture between ArcelorMittal and Nippon Steel for Essar Steel. The eligibility of both the bidders is being evaluated by law firm Cyril Amarchand Mangaldas and the results are expected to be out on Monday.

“If there’s a perception that we are a proxy to a family in India, it’s far-fetched,” argued Makram Abboud, vice-chairman (international), VTB Capital, a unit of VTB. He added, “The bank is publicly listed with the Russian government (60%) and some sovereign wealth funds owning stakes in it. They can’t be a proxy for one Indian family.”
Abboud, 47, a British national of Lebanese origin, said that Ruias have been a client and “we have a successful business relationship, but we are not married to each other”. VTB had advised the Ruias in their recent sale of Essar Oil to a Rosneft-led group.
“We will be disappointed if the law is not followed and we are disqualified on the basis of ineligibility. We will then take other actions to protect our interest as our bid is within the law,” Abboud said. He clarified that Rewant has no board membership on Numetal, and also he is not associated with Essar Steel in India. “We are battling perceptions and we want to correct that. There is a stigma of making it sound like something is wrong. Only perception can hurt us, not facts.”
The consortium’s keenness on acquiring Essar Steel is evident from the fact that it is even ready to buy out Rewant’s stake if need be. “We will make whatever changes are needed. We have the flexibility to make changes in our bid.” While VTB is the largest shareholder, the consortium’s other members — including Russian engineering firm TPE, UAE-based commodity trading company Indo International and former SAIL chairman C S Verma — hold 35% in Numetal.
ArcelorMittal’s offer too is under scanner as the company and its chairman Lakshmi Mittal held stakes in two defaulting companies, and insolvency rules prohibit participants holding such interests until a year before making a bid. The metal-maker and Mittal sold off their stakes in Uttam Galva Steels and KSS Petron, both non-performing assets, days before bidding for Essar Steel. According to reports, ArcelorMittal has offered a bid that is much higher than Essar Steel’s Rs 45,000-crore debt, as well as more than Numetal’s. “By throwing such figures despite being ineligible, you are spoiling the party for all,” Abboud said.
VTB, which already has financial investments in India across media, telecom, textile, commodities and infrastructure sectors, has been looking to acquire Essar Steel for long. It had held talks with the Ruias multiple times before Essar Steel faced bankruptcy proceedings, but nothing materialised. “This is a company we know very well as we have done work on it. This time, both luck and faith came together,” said Abboud, explaining why VTB didn’t look at Bhushan Steel and Bhushan Power & Steel which, too, are going through the insolvency process.