BPSL liquidation: SC setback may be a minor bump as JSW expands capacity

Loss of BPSL could trim JSW Steel's total steel production capacity by 12%

JSW Steel Ltd is expected to see a modest impact on earnings and balance sheet from the potential loss of Bhushan Power & Steel Ltd (BPSL), after the Supreme Court invalidated its acquisition under the Insolvency and Bankruptcy Code (IBC). The move may, however, delay JSW Steel’s growth trajectory by a few years.

 

BPSL contributed 8 per cent  JSW Steel’s consolidated net profit and 12.5 per cent consolidated net sales in FY24. It also accounted for 11.5 per cent of JSW Steel’s total assets at the end of the financial year.

 

The setback could trim JSW Steel’s total steel production capacity by nearly 12 per cent. BPSL had a crude steel capacity of 3.5 million tonnes (mt) as of March 2024, making up 11.8 per cent of JSW Steel’s consolidated capacity of 29.7 mt per annum.

 

JSW Steel, however, is already expanding capacity by 6.5 mt at its Vijayanagar and Dolvi units, with commissioning expected by 2027-28, more than offsetting the likely loss of BPSL’s capacity. 

 

Brokerages estimate the loss of BPSL could shave around 5 per cent off JSW Steel market cap. “In the worst case, our fair value of JSW Steel shall be reduced by ₹11,400 crore (₹47/share), assuming JSW loses control over BSPL and receives only ₹19,700 crore paid to creditors and does not receive even the investment made to expand the capacity from 2.75 mtpa to 4.5mtpa," wrote analysts at Nuvama Wealth Management.

 

Shares of JSW Steel closed at ₹972 apiece on Friday, down 5.5 per cent, giving the company a market value of ₹2.37 trillion. It acquired the financially distressed BPSL in March 2021 for an enterprise value of ₹19,350 crore, including ₹5,087 crore in cash under the IBC process. The Supreme Court has now annulled the acquisition, calling it “illegal” and in “gross violation” of the IBC.

 

The court has ordered BPSL’s liquidation, setting the stage for a fresh bidding war. While JSW may bid again, a higher acquisition cost is expected due to rising steel sector valuations and BPSL’s capacity upgrades since 2021.

 

The combined market cap of India’s top four integrated steelmakers has more than doubled over four years to ₹5.64 trillion as of April 2025, from ₹2.78 trillion in March 2021. JSW Steel’s market cap surged 122 per cent in the period, from ₹1.13 trillion to ₹2.51 trillion.

 

BPSL, an 83.38 per cent-owned subsidiary of JSW Steel, reported FY24 net sales of ₹21,893 crore, up 9 per cent from the prior year. It contributed roughly 12.5 per cent to JSW Steel’s consolidated net sales of ₹1.75 trillion, which rose 5.5 per cent year-on-year. Profit after tax jumped more than fourfold to ₹674.3 crore, representing 7.7 per cent of JSW Steel’s FY24 net profit of ₹8,812 crore. Group earnings more than doubled (up 112.6 per cent) from ₹4,144 crore in FY23.

 

For the nine months ended December 31, 2024, however, JSW reported a 3.7 per cent decline in consolidated net sales to ₹1.22 trillion and a 73.4 per cent drop in net profit to ₹2,001 crore.

 

BPSL’s total assets rose 2.9 per cent year-on-year to ₹19,698 crore as of March 2024, comprising 11.5 per cent of JSW Steel’s consolidated assets of ₹1.71 trillion. BPSL carried ₹6,476.1 crore in outstanding debt, compared with JSW’s total debt of ₹87,948 crore.