ArcelorMittal flags risks on Essar Steel acquisition

On the financial front, there are uncertainties and risks in respect of ArcelorMittal’s exposure (via equity investment in the JV and possible guarantee of the JV’s debt). 

Published: 27th February 2019 07:45 AM  |   Last Updated: 27th February 2019 07:45 AM   |  A+A-

A logo is seen on the roof of the ArcelorMittal steelworks headquarters in Ostrava, Czech Republic, April 1, 2016. (Photo: Reuters)

By Express News Service

NEW DELHI: Global steel giant ArcelorMittal has said that it is staring at various risks including excess capital expenditure and delays in achieving commercial objectives in view of its proposed acquisition of debt-laden Essar Steel India.

The steelmaker’s proposal to take over Essar Steel India (ESIL), via a joint venture (JV) with Nippon Steel & Sumitomo Metal Corporation (NSSMC), in a bankruptcy resolution process has been approved by the committee of creditors (CoC) and is pending before the National Company Law Tribunal (NCLT).

“Should the resolution plan be implemented, as is currently expected, it would subject ArcelorMittal to various risks. On the operational front, the industrial project to turnaround ESIL and further improve operational profitability is large-scale and ambitious,” ArcelorMittal’s annual report said.

While the company has “substantial experience in turnaround situations”, it pointed out that the scale of this one is particularly large and it is the company’s inaugural large-scale acquisition in India, an emerging market. The risks in this respect are compounded to an extent by the fact that ESIL is emerging from bankruptcy and it will be owned and operated by a JV with attendant risks around strategic alignment, potential discord and deadlock, it added.

On the financial front, there are uncertainties and risks in respect of ArcelorMittal’s exposure (via equity investment in the JV and possible guarantee of the JV’s debt). 

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp