Debt reduction, joint venture benefits positive for JSW Steel

JSW Steel Ltd (JSTL) has announced a restructuring that unlocks value from Bhushan Power & Steel Ltd (BPSL) and changes the balance-sheet. JSTL will do a slump sale of 50 per cent stake in BPSL to Japan's JFE Steel in two equal tranches, totalling 15,700 crore in cash. This implies an enterprise value of ₹53,000 crore.

- DEVANGSHU DATTA

The enterprise value comprises ₹31,500 crore of equity value and another ₹21,500 crore of debt transfer, the latter including BPSL's existing borrowings of ₹5,000 crore, and ₹16,500 crore of additional debt, which is to be raised at JSW Sambalpur (the entity that acquired BPSL through a 24,500 crore slump sale).

Ahead of the JFE partnership, JSTL cent stake of JSW Shipping in Piombino at an implied equity value of ₹43,000 crore by swapping equity of JSTL, resulting in the promoter stake rising from 45.32 per cent to 46.74 per cent in JSTL.

Overall, JSW Steel will receive ₹24,500 crore in cash for slump sale of its stake, and JSW will also get ₹7,900 crore through equity dilution on the back of the share-swap agreement with Piombino, which owned 17.35 per cent of BPSL.