JSW Steel could be forced to fell off his investment of 19,700 sterling books in Bhushan Power & Steel Ltd (BPSL), after the Supreme Court declared the acquisition of illegal 2021 and ordered the liquidation of the company. The decision has made JSW shares fall by 5.5% by 5.5% to 972.15 ₹ and could potentially rave 10 to 15% of the company’s production capacity and around 10% of its consolidated Ebitda.
JSW Steel had acquired BPSL as part of its aggressive expansion plan and invested 3,500 to 4,500 crores after the acquisition to increase the capacity of 2.75 Mt to 4.5 MT. Plans were in place to get it to 10 Mt by 2030–31.
CLSA noted that BPSL represents 10 to 11% of JSW 25 to 27 EBITDA and highlighted the investment of $ 800 / ton made of 3.5 MT of capacity. Morgan Stanley described the verdict as “materially negative”, citing BPSL’s key role in JSW’s growth strategy.
What happened:
Decision of the Supreme Court: The Supreme Court ordered the liquidation of BPSL, qualifying the acquisition of JSW Steel Invalide.
Why the agreement was abandoned:
- JSW used a mixture of equity and possibly convertible denying (OCD) in violation of IBC standards.
- The resolution plan has not been implemented within the IBC deadlines.
- The creditors’ committee (COC) and the resolution professional failed in their statutory functions.
Financial impact:
- JSW can face an EBITDA deficit of 4,000 to 4,500 sterling books during the 2010 financial year.
- BPSL represents more than 13% of the production of JSW and 10% of the EBITDA.
- The company may need to harm the entire investment of 19,700 sterling books.
Market reaction:
Actions have dropped sharply; JSW’s market capitalization fell to 2.37 Crere Lakh.
Business response:
JSW said he would examine the order with legal advisers before deciding on the next steps.
Wider implications:
- Raises serious concerns about the credibility of the insolvency process.
- Could have an impact on the confidence of investors in the future acquisitions of the assets in distress.
