Supreme Court Rejects JSW Steel's Acquisition of Bhushan Power & Steel; Estimated Loss up to ₹15,000 Crore.
JSW Steel News: The recent Supreme Court ruling poses a significant challenge for JSW Steel. The Supreme Court deemed the acquisition of Bhushan Power & Steel illegal, ordering the company towards liquidation. This could result in substantial losses for JSW Steel.
Acquisition of Bhushan Power & Steel
In 2019, JSW Steel acquired Bhushan Power & Steel for ₹19,700 crore, the largest deal in the company's history. However, despite receiving approval from the National Company Law Tribunal (NCLT), the Supreme Court declared the acquisition illegal. This directly impacts JSW Steel's financial position and expansion plans.
Potential Decline in Production and Revenue
Bhushan Power & Steel contributes 13% to JSW Steel's overall production capacity. If the company enters liquidation, JSW Steel may face a 10-15% decline in production and approximately 10% decrease in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Estimates suggest a loss of ₹4,000-4,500 crore for JSW Steel.
Potential Loss of ₹15,000 Crore
Analysts suggest that JSW Steel could incur losses up to ₹15,000 crore due to this legal dispute and associated financial and legal costs related to Bhushan Power. Although the company might recover some funds, the deal is likely to prove financially detrimental for JSW Steel.
Share Price Decline and Market Impact
Following the Supreme Court's decision, JSW Steel's shares dropped by 5.5%, closing at ₹972.15 on the BSE. As a result, the company's market capitalization stands at ₹2,37,734 crore.
Threat to Future Expansion Plans
JSW Steel aimed to increase its production capacity to 50 million tons by 2030-31. Bhushan Power & Steel was to play a crucial role in this expansion; however, the Supreme Court's ruling jeopardizes these plans. JSW Steel may now need to reconsider its growth strategy.
