JSW Steel has entered into a 50:50 joint venture with Japan’s JFE Steel Corporation, restructuring the ownership of Bhushan Power and Steel (BPSL) and creating a separate platform for its future expansion.
As part of the transaction, the BPSL steel business will be transferred to JSW Sambalpur Steel through a slump sale valued at Rs 24,483 crore. JSW Sambalpur is wholly owned by JSW Kalinga Steel, which will become the actual joint venture vehicle. JFE will acquire a 50% stake in JSW Kalinga for Rs 15,750 crore, invested in two equal tranches, resulting in joint control of the asset once all transactions are completed.
JSW Steel management said the deal would reduce its consolidated net debt by Rs 37,250 crore by June 2026. This will be achieved through three components: the slump sale proceeds of Rs 24,483 crore (which include the first tranche of JFE’s investment); the transfer of approximately Rs 4,900 crore of existing BPSL debt into the joint venture structure and the receipt of Rs 7,875 crore from JFE’s second-tranche equity infusion.
What did JSW CFO say?
Swayam Saurabh, chief financial officer, JSW Steel said with the reduction in debt, which stands at Rs 80,000 currently, the company’s net debt to Ebitda ratio will also decline in the coming quarters. JSW Steel emphasised that the joint venture is intended to support the next phase of BPSL’s development. The company acquired the asset in 2021 under the insolvency process and has since expanded its capacity from 2.75 million tonne to 4.5 million tonne.
With land available for subsequent phases, JSW Steel management noted that the venture provides a pathway for BPSL to scale up to 10 million tonne per annum capacity while operating with shared technical oversight. “Today’s announcement brings together JSW’s expertise in India with JFE’s technological strengths and will enable the joint venture to realise its growth potential and produce a variety of value-added steels,” Jayant Acharya, joint managing director and CEO, JSW Steel said.
JFE’s participation is expected to strengthen the technological depth of the operation. The company has been a longstanding collaborator of JSW Steel, and its preference for a clean entry structure shaped the choice of JSW Sambalpur under JSW Kalinga as the vehicle for the partnership.
Masayuki Hirose on the partnership?
JFE’s chief executive Masayuki Hirose said, “I am confident that by leveraging our technological strengths and jointly operating an integrated steel plant in India with JSW, we will not only contribute to the further growth of both companies but also make a significant contribution to the development of the Indian steel industry.”
The joint venture will have equal board representation and shared functional responsibilities, with both companies leading areas aligned to their respective strengths, JSW management said while addressing the media in Mumbai on Wednesday. They also clarified that while the product mix to be manufactured at the BPSL facility under the new JV will be decided in due course, green steel will continue to be manufactured at the dedicated facility in Salav, as announced earlier in the year.
For JSW Steel, the management added, the financial impact of the transaction provides added flexibility as it progresses expansion projects at Vijayanagar, Paradip and other sites. The deleveraging effect also contributes to balance-sheet discipline at a time when the company is preparing for future phases of capacity addition.
It has stated its ambitions to reach 51 MTPA capacity by 2031, and Acharya said that the deleveraging afforded by the transaction will accelerate JSW Steel’s growth path. JSW Steel’s acquisition of BPSL has been in the news this year with a Supreme Court ruling in May ordering the reversal of the acquisition. The apex court’s order was stayed eventually when the steelmaker appealed for a review of the judgement.
The management did not comment on whether the court proceedings impacted the deal with JFE and maintained that the partnership is a strategic call to accelerate the growth of both JSW Steel and BPSL.
