Japan's JFE to invest Rs 15,750 cr for 50 pc share in steel biz of JSW Steel-led BPSL

Mumbai, Dec 3 (PTI) JSW Steel on Wednesday said that Japanese firm JFE Steel Corporation has agreed to invest Rs 15,750 crore for a 50 per cent stake in the steel business of Bhushan Power and Steel (BPSL).

BPSL will be an equal joint venture between JFE and JSW Steel from here on, and the transaction values the enterprise at Rs 53,000 crore, an official said.

Company executives said the deal will help JSW Steel reduce debt by over Rs 37,000 crore by June next year, and also help both JSW Steel and BPSL to grow the business going forward. JSW Steel's debt stood at Rs 79,000 crore as of end-September.

BPSL was acquired by JSW Steel through the bankruptcy process in 2021 at over Rs 19,700 crore. The entity's steel business is set to become an equal joint venture between JSW Steel and JFE.

The deal starts with the BPSL steel business being transferred to a new entity under JSW Kalinga Steel (JKS) for Rs 24,483 crore by way of a slump sale.

JKS is fully owned by Piombino Steel, which has a nearly 83 per cent ownership of JSW Steel and the rest owned by a company run by the Sajjan Jindal-led promoter grouping.

Nearly Rs 5,000 crore of JSW Steel's debt also gets transferred to JKS as part of the agreement.

JFE will be purchasing a 50 per cent stake in JKS for Rs 15,750 crore in two equal tranches, officials said, and explained the overall deleveraging for JSW Steel.

The debt of JSW Steel will go down by Rs 24,483 crore when the BPSL business transfer to JKS happens, an additional Rs 5,000 crore benefit will come by way of transfer of the debt, and on top of that will be the Rs 15,750 crore which JFE is paying for the stake buy, they said.

The promoter group's share in JSW Steel will go up by 1.42 per cent for the over 17 per cent stake in Piombino Steel, they said.

The entire transaction with JFE will be completed by June 2026 after requisite approvals and also payments of both tranches by JFE, they said, adding that the BPSL steel business will be renamed and run as a separate entity.

Both the partners will have equal representation on the board of BPSL, the officials said, adding that JSW Group does not have any plans to reduce its stake in the business further.

BPSL steel business, which has a capacity of 4.5 million tonnes per annum, will achieve its intended target of a ramp-up to 10 MTPA by FY31, an official said.

The deleveraging will also help JSW Steel to accelerate on its expansion, and added that the capacity in FY31 will come out to be much higher than the 51 MTPA target.

Jayant Acharya, the joint managing director and chief executive of JSW Steel, said that BPSL's capacity was not included while coming out with the 51 MTPA target by FY31.

"JFE has been a trusted partner for JSW Steel since 2009, and the relationship has strengthened over the years as both companies have collaborated on numerous initiatives," Acharya said, adding that this is a complementary deal wherein JSW Steel will get its local understanding of business and JFE will get its deep expertise in steel making.

"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," JFE Steel Corporation's president and CEO Masayuki Hirose said.

The JSW Steel stock saw some selling by investors after the deal announcement in the afternoon, and closed the session 1.23 per cent down at Rs 1,147.50 apiece on the BSE on Wednesday, as against a 0.04 per cent correction on the benchmark. PTI AA HVA