Legal and accounting advisers reviewing bids for Essar Steel India Ltd. are recommending that all bids be disqualified, Bloomberg News reported Feb. 20, citing anonymous sources.
Global steel giant ArcelorMittal and a consortium led by Russia's VTB Group were the only two bidders for the insolvent steel company.
The sources said the opinion of the advisers serves only as a guide and it is not certain the bids will be disqualified.
A final decision would rest with a committee of Essar Steel lenders, which is set to meet shortly to discuss the eligibility of the proposals, and India's National Company Law Tribunal.
According to the report, ArcelorMittal's offer was higher than VTB's but is considered ineligible, as the steel giant owns a 29.1% stake in Uttam Galva Steels Ltd., which is listed as a delinquent borrower.
An external spokesman for ArcelorMittal dismissed the notion of any legal basis to render the company's bid ineligible.
Earlier in February, a member of Uttam Galva's founding Miglani family told Reuters that ArcelorMittal was selling its entire stake in Uttam Galva Steels to the company's founders at a discount.
The VTB consortium is supported by the son of a billionaire founder of Essar Steel and is deemed ineligible by advisers, considering new Indian bankruptcy laws that make it difficult for company founders with long-term nonperforming loans to bid for assets that are in insolvency proceedings.
Billionaire brothers Shashi and Ravi Ruia owned Essar Steel before it was brought under a new insolvency resolution process, while VTB backers include Ravi's son, Rewant Ruia.
"We have not received any such information from the resolution professional or his legal advisers," said a representative of Numetal, the Mauritius-based investment vehicle the Russian financial group used to submit the bid.
"Numetal is a fully eligible resolution applicant and has submitted its resolution plan for Essar Steel," the representative said.
Essar Steel, which is liable for claims of about 518 billion Indian rupees, is expected to get a valuation of at least US$6 billion.
As of Feb. 19, US$1 was equivalent to 64.51 Indian rupees.