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Essar Steel India Limited: Managing and ...

Agarwalla, Sobhesh...

Case

Essar Steel India Limited: Managing and Turning Around a Distressed Firm in Insolvency

Agarwalla, Sobhesh Kumar; Pandey, Ajay; Birmiwal, Nupur; Srivastava, Shreyas

IIMA-FA0571 | Published July 15, 2022 | 33 pages Case

Collection: Indian Institute of Management, Ahmedabad

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Learning Objectives

Essar Steel India Limited was one of the first 12 firms admitted for insolvency resolution under a newly created law in India—the lnsolvency and Bankruptcy Code, 2016. The case describes the challenges faced by the professional turnaround firm Alvarez and Marsal India (A&&M) that was appointed by the committee of creditors to preserve and enhance value before Essar Steel could be sold to a new investor at a price that would minimise the “hair cut” for the creditors. Mr Nikhil Shah, a managing director at A&&M, reflected on his team’s experience with simultaneously turning around Essar Steel and managing the processes laid out by the code as per the law. The case provides insights into how insolvencies were dealt with in India under the new code and how a professional firm managed a financially distressed firm and turned it around.

To make the participants understand the importance of a legal framework for dealing with the firms unable to pay their dues to the creditors. To familiarize the participants with the current lndian law- IBC 2016 specifying the resolution process for an insolvent/bankrupt firm. To make the participants understand the need for independent and professional managers to preserve and add value to the firm in financial distress. To make the participants understand the challenges likely to be faced by a restructuring agency or managers entrusted with preserving the value of a firm under financial distress. To make the participants understand the implications of business house/ promoter controlled firms under distress having significant business relationships with firms controlled by the same promoter/business house.