SC ruling on BPSL likely to have adverse bearing on JSW Steel's financials

Business Standard

06-05-2025

The Supreme Court ruling against JSW Steel's resolution plan for BPSL take over is likely to have an adverse bearing on the financials of the Sajjan Jindal-led steel major which may witness a 13 per drop in revenues, ratings firm CreditSights said on Tuesday.
JSW Steel may also lose its competitiveness along India's mineral-rich east coast, where BPSL's steel plant is located, the FitchSolutions company said in a report.
CreditSights said it views that the loss of BPSL as modestly credit negative for JSW (Steel).
Last week on Friday, the Supreme Court set aside a resolution plan submitted by JSW Steel for BSPL, holding it illegal and in violation of the Insolvency and Bankruptcy Code (IBC).
A bench comprising Justices Bela M Trivedi and Satish Chandra Sharma criticised the conduct of all key stakeholders in the resolution process -- the resolution professional, the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT) -- for enabling what it termed a "flagrant violation" of the IBC, and ordered the liquidation of BSPL under the IBC.
CreditSights said if JSW Steel fails in its attempts to save the BPSL asset, the company will have to surrender BPSL back to the NCLT, resulting in a deconsolidation of BPSL's financials.
"The deconsolidation (of BPSL) will inevitably reduce JSW's pro-forma steelmaking capacity by 13 per cent, steel production by 13 per cent, revenue by 13 per cent, and EBITDA by 9 per cent," it said.
In FY25, JSW Steel produced 26.98 MT crude steel, posting a 6 per cent year-on-year rise over 25.55 MT in FY24.
In October-December quarter of FY25, the company saw its net profit slashing almost three-fold to Rs 719 crore from Rs 2,450 crore in same period of the preceding financial year.
The company also saw its total income falling to Rs 41,525 crore in the third quarter of FY25 from Rs 42,134 crore in the year-ago period.
In April-December (9M FY25), the company's net profit was at Rs 7,651 crore, down from Rs 8,873 crore in the nine-month period of FY24.
JSW Steel is scheduled to report its financial numbers for the fourth quarter and entire FY25 on May 23.
The steel maker acquired Bhushan Power & Steel (BPSL) in September 2019 after the National Company Law Tribunal (NCLT) approved its resolution plan. The acquisition was completed in March 2021.
JSW Group Chairman Sajjan Jindal had said that the acquisition of BPSL marks JSW Steel's entry into the eastern region.
The acquisition not only aligns with core business and purpose but also establishes presence and accelerates growth vision in eastern India, Jindal had said in a letter to BPSL employees.
Located in Odisha's Jharsuguda, BPSL recorded a crude steel production capacity of 3.38 million tonnes (MT) in FY25.
JSW Steel had envisaged ramping up BPSL's capacity to 5 MT, eyeing to benefit from the higher sales and realisations from value-added products such as colour-coated, galvanised sheets, pipes and wires.
The report further said that if BPSL goes out, JSW will lose its competitiveness along India's mineral-rich east coast, which BPSL primarily serviced and operated in.
CreditSights also suggested JSW to approach the apex court for a review of the order.
"In the review, we believe JSW may propose changing the resolution plan to be fully equity funded or convert the debentures to equity, given the use of debt was a key factor resulting in the SC's rejection of the plan," it said.
The company could offer penalties and fines for late payment of creditor dues too. If the review is unsuccessful, JSW can then file a curative petition intended as a final recourse in India's legal system, that will be decided by a larger bench.
If the SC does not reverse its ruling, JSW would have to surrender BPSL assets to NCLT/lenders. The capex incurred and capacity added subsequently at BPSL will complicate the process, unless the added assets are carved out of the divestiture.
A query seeking response of JSW Steel remained unanswered.