ArcelorMittal shares fell more than 2 percent on Tuesday after the world's largest steelmaker said it had raised its offer for India's Essar Steel, prompting concerns that it was overpaying.

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ArcelorMittal is forming a joint venture with Japan's Nippon Steel & Sumitomo Metal Corp to bid for Essar in competition with bids from Russian lender VTB and Vedanta Resources.

It said on Monday that it had submitted a revised proposal representing a "material increase" on its two previous offers.

Indian media reported that ArcelorMittal had raised its bid to 420 billion rupees ($5.78 billion), well above the 305 billion reported earlier.

ArcelorMittal has also agreed to pay about $1 billion to creditors of two steel companies in which it had held a minority stake and to another in which CEO Lakshmi Mittal held a small holding. An Indian tribunal had demanded this.

One London-based analyst said the price in dollars per tonne of capacity was about twice that proposed in ArcelorMittal's bid for similarly sized Italian steelmaker Ilva.

ArcelorMittal has agreed to pay 1.8 billion euros for Ilva and will invest an additional 2.3 billion on productivity and pollution controls.

ArcelorMittal shares were down 2.6 percent at 24.37 euros at 1111 GMT, making them one of the weakest performers in the FTSEurofirst 300 index of leading shares.

Essar is being sold as part of an Indian corporate insolvency resolution process. ArcelorMittal CEO Mittal has described Essar as a "compelling" opportunity for his company to enter the high-growth Indian steel market and said it had a detailed plan to improve Essar's performance.

Essar's main plant, in the western Indian state of Gujarat, has an annual capacity of 9.6 million tonnes but an actual maximum of 6.1 million tonnes due to bottlenecks.

India plans to roughly triple domestic steel production to 300 million tonnes per year by 2030.