JSW Steel Ltd’s agreement with Japan’s JFE Steel Corp. to form a 50:50 joint venture (JV) for ownership of Bhushan Power & Steel Ltd (BPSL) will not only help it deleverage, but also fund its ongoing capital expenditure. In turn, JFE will get a stronger foothold in the fast-growing Indian market amid subdued global opportunities.
It’s worth noting here that JFE bought about 15% stake in JSW Steel in 2010 for ₹4,800 crore, which is now valued at about ₹42,000 crore. JFE’s sales of ¥3.4 trillion (about ₹2 trillion) for the year ending March 2025 was close to JSW Steel’s ₹1.7 trillion. However, JFE’s technological advantage cannot be ignored.
JSW Steel acquired BPSL in 2021 through bankruptcy proceedings. The acquisition went through a phase of uncertainty with the Supreme Court declaring it illegal in May 2025, citing various lapses, before reversing its decision in September.
BPSL has a steelmaking capacity of 4.5 million tonnes per annum (mtpa), up from 2.75 mtpa at the time of the acquisition. It could potentially be expanded to 10 mtpa and enter into more advanced steelmaking, aided by JFE’s technology. “With clear governance ring-fencing and deeper technology integration from JFE, the JV enhances product capabilities and provides JFE a meaningful India entry, supporting multi-year strategic upside for both partners,” noted a JM Financial Institutional Securities report.
The deal involves the transfer of BPSL assets from JSW Steel to the JV JSW Kalinga Steel (through a step-down subsidiary) for ₹53,100 crore. JSW Kalinga will pay this by raising ₹15,750 crore as equity from JFE for a 50% share. An equal amount for JSW Steel’s stake in the JV will be booked as a non-cash transaction. It will also raise fresh debt of ₹16,600 crore and take over debt worth ₹5,000 crore from JSW Steel, corresponding to BPSL’s assets.
Nuvama Institutional Equities estimates BPSL’s enterprise value at 12.4 times estimated FY28 Ebitda, a higher valuation multiple than JSW Steel’s 8.5 times. “JFE does not mind paying up seemingly excess value as this plant has the capacity to expand to up to 15 mtpa (now 4.5 mtpa) at relatively low cost,” the brokerage added.
Non-binding guarantee
BPSL’s total assets at the end of FY25 stood at ₹24,000 crore, and net worth at about ₹7,000 crore. JSW and JFE will provide a letter of comfort (a non-binding assurance or guarantee) for the JV’s borrowing, meaning JSW will not be legally liable if the JV defaults. Hence, the final structure of the deal will be contingent upon the JV’s ability to raise funds. JFE will pay the second tranche for its stake after the JV raises the required debt.
JSW’s debt would drop to about ₹43,000 crore after the deal, from ₹79,000 crore at the end of September. Existing debt corresponds to a net-debt-to-Ebitda ratio of 3. The deal would help JSW manage its finances better given projects worth ₹76,000 crore under execution, which would take its total capacity to 43.4 mtpa by FY28 from 36 mtpa at present. JSW plans to increase it further to 50 mtpa by FY31. While the company’s Ebitda, adjusted for forex transactions, rose by 42% in H1FY26 led by higher sales volume, earnings remain vulnerable to volatile steel prices.
JSW’s shares are up about 29% so far in 2025, more than than the 20% increase in the Nifty Metals index. Investors will take further cues from the progress of the proposed deal.
