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Arcelor's entry to give muscle to Indian steel market
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SME Times News Bureau | 15 Nov, 2019
A new game is set to begin in the Indian steel sector with
ArcelorMittal, the world's largest steel company, all set to take over
the assets of Essar Steel.
The acquisition is being touted as the
country's first fire sale to have witnessed fierce fight for control
between rival entities.
The Supreme Court on Friday allowed
ArcelorMittal to make payment for Essar Steel India, paving the way for
acquisition of the bankrupt steel maker by the Luxembourg-headquartered
entity.
Steel sector analysts agreed that ArcelorMittal's might
could heat up competition in the Indian market and result in the
introduction of a new category of value added product segment that till
now is either being imported or is available in lesser quantity in the
country. The action may also shift to auto grade steel where other steel
makers such as Tata Steel and JSW are fighting fiercely for market
share.
"Acquisition of Essar Steel presents a good opportunity
for ArcelorMittal to have a foothold in the Indian market. But to
realise full potential from Essar Steel, the company would need to first
invest and build synergies around its global operations, so that cost
could be brought down and products are made competitive.
"Also,
demand conditions would play an important role in the growth of steel
operations post the entry of ArcelorMittal in the Indian market," said
steel market investment and market strategist A.S. Firoz.
ArcelorMittal's
bid amount of Rs 42,000 crore emerged successful as it was much higher
than the other bidder, Vedanta, and would help the lenders realise about
85 per cent of their total debt exposure of close to Rs 49,000 crore.
ArcelorMittal
has indicated that it will not only turn around the stressed asset of
Essar Steel, but will also explore setting up a new steel plant close to
the company's current pellet unit at Paradip in Odisha. The capacity of
the steel plant in Gujarat may also be ramped up to full scale of 10
million tonnes (mt) and further to 15 mt.
Moreover, sources said
that ArcelorMittal is bidding with Nippon Steel for Essar. This would
help the two to use their global approval for auto grade steel to source
steel from Essar Steel India after the restructuring. It will provide a
greater number of ready-made customers to Essar Steel.
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