JSW Steel's Rs 15,750 crore Bhushan Power deal value-accretive; share price targets

JSW Steel’s signing of an agreement with JFE for a 50:50 joint venture (JV) to run Bhushan Power & Steel Ltd (BPSL) at an enterprise value of Rs 53,100 crore came in higher than analysts’ incorporated values, triggering upward revision in target prices. 

Analysts said the deal will be value-accretive for JSW Steel as not only is the stake being sold to JFE at a higher value, but it infuses cash in the business. “This deal is likely to enhance JSW’s fair value by Rs 37 per share (ceteris paribus). Even so, given the stock’s expensive valuation and a potential further earnings downgrade amid soft steel prices, we reiterate ‘REDUCE’ with a target of Rs 1,050,” Nuvama said. 

BPSL was acquired in 2021 through the IBC process at a consideration of Rs 19,350 crore. At present, it operates a 4.5mtpa integrated steel facility in Odisha, which was expanded from 2.75mtpa post-acquisition. JSW Steel has turned around the BPSL operation, generating revenue of Rs 21,440 crore in FY25, with Ebitda and net profit of Rs 2,210 crore and Rs 260 crore, respectively. BPSL’s net debt stands at Rs 5,000 crore.

Now JSW Steel has agreed to sell 50 per cent stake in BPSL to JFE Steel for Rs 15,700 crore in cash, payable in two equal tranches. As part of the transaction, BPSL, now a step-down subsidiary of JSW Steel, will be transferred to JSW Sambalpur via a slump sale for a cash consideration of Rs 24,480 crore. JFE Steel Japan will invest a total of Rs 15,750 crore in two tranches for a 50 per cent stake in the 50:50 JV. The transaction has been executed at an enterprise value of Rs 53,000 crore, including Rs 31,500 crore of equity and Rs 21,000 crore of debt.

Emkay Global said the enterprise value for the deal is significantly above its estimate of Rs 40,500 crore. This monetisation step also delivers a material balance-sheet benefit, with JSW Steel achieving Rs 37,000 crore of deleveraging following the sale and associated debt transfer. 

“We understand immediate deleveraging and getting prepared for the next leg of capacity expansion cycle­­—at a time when steel consumption growing at 8-9 per cent per annum is expected to push the market into a deficit in the next 2–3 years—as key rationale for this transaction. We maintain our estimates and reiterate ADD with a target of Rs 1,200,” it said.

MOFSL said JSW Steel will receive Rs 32,000 crore in cash consideration. Its consolidated debt will reduce by Rs 35,000 crore, including Rs 50,000 crore of debt currently held by BSPL. Out of the total amount, Rs 24,400 crore will be received by March, with the balance expected by September 2026, subject to approvals. The JV is expected to raise debt of Rs 21,000 crore, which will be used to pay off JSTL as part of the transaction.

MOFSL said it remained positive on the company outlook, estimating double-digit revenue growth in FY26/FY27, driven by the ramp-up of new capacity and price recovery. As input costs are expected to remain soft, MOFSL believes Ebitda margin will rebound to 18-19 per cent in FY26 and FY27 on account of domestic steel price recovery, led by safeguard duty. 

“The recent development will support JSW Steel’s deleveraging plan. Its net debt-to-Ebitda ratio declined to 2.97 times as of Q2FY26, which we expect to decline to 1.7 times by FY27E, supported by robust operating profit,” it said.