Aditya Mittal, scion of the LN Mittal empire, is likely to chair the board that will run Essar Steel, with directors drawn from the two acquiring partners — ArcelorMittal and Nippon Steel Corp of Japan. Top industry sources told ET that both companies are working on putting together a core strategy and integration team as the world’s biggest maker of the infrastructure alloy gets ready to take Essar Steel into its fold, marking Arcelor-Mittal’s first major foray into India. Nippon Steel is expected to send at least two members to the joint board, according to sources close to the discussions. The partners will share responsibility of running Essar Steel: While Nippon Steel will likely focus on operations, Arcelor-Mittal will take charge of marketing and customer relationships, sources said. At 8.6 mtpa, Essar Steel is one of the largest flat-steel facilities in the world. The facility, under administration over debt repayment, is one of the most integrated with downstream and upstream units that include hot
and cold-rolling plants, plate mill, pipe unit and pellet factories. ArcelorMittal declined to comment “until completion of the transaction”. On the two partners sharing the responsibility of running Essar, a spokesperson at ArcelorMittal referred to a recent comment by the company: “After completion, ArcelorMittal will jointly own and operate ESIL in partnership with Nippon Steel Corporation (NSC)…, in line with the joint venture formation agreement.” ArcelorMittal had said in its most recent earnings announcement (Q3, 2019), that “ArcelorMittal and NSC expect to finance the JV through a combination of partnership equity (one-third) and debt (two-thirds), and ArcelorMittal anticipates that its investment in the joint venture will be equity accounted.” Duo Has Technical Expertise Nippon and Arcelor are believed to be discussing the likelihood of raising funds in Japan, where the cost of money could be lower than in other global hubs.“Arcelor’s acquisition of Essar Steel is an important development for the
Indian steel industry. The Nippon-Arcelor duo has the required technical expertise, marketing acumen and financial capability to run Essar,” said Sanak Mishra, former CEO of ArcelorMittal India. Mishra, who has also been an adviser to Essar Steel India, described the latter as “a world-class” asset. “LN Mittal has vast experience in taking over and turning around large steel plants across the world. And, he has the right people to do it,” Mishra added. Nippon Steel is a leading global player in flat-steel and galvanised products, which are high value-added items used in making cars and consumer durables. In the past three years, the Essar Steel plant has raised its flat-steel output from 5 mtpa to 7.2 mtpa, and has turned EBITDA-positive. “The bleeding has stopped,” an official at Essar said. The plant has a rolling capacity of 8.6 mtpa with CR, galvanized and colour-coating lines. The new owners can increase output by 1mtpa by simply adding a caster, a source said. More significantly, Uttam Galva, with its downstream facilities, has also come into the LN Mittal empire, and the new owners could extract the geographical synergy as both sets of acquired assets are in western India.