JSW Steel JV with JFE to unlock value, help deleveraging, say analysts

Emkay Global Financial Services values BPSL at ₹53,000 crore or 11.8x on FY27E, with EV/Ebitda, well above its prior internal estimate of ₹40,500 crore

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JSW Steel has announced a major restructuring around its subsidiary Bhushan Power & Steel Ltd (BPSL), signing a 50:50 joint venture (JV) with Japan’s JFE Steel Corporation that monetises the asset at a rich valuation and sharply deleverages the balance sheet, according to analysts. 

 

Emkay Global Financial Services sees the move as a value-unlocking, balance-sheet–strengthening step and reiterates an ‘Add’ rating with a ₹1,200 target price. Similarly, Motilal Oswal remains positive on the company outlook, estimating double-digit revenue growth in FY26/FY27, driven by the ramp-up of new capacity and price recovery and maintains 'Buy' rating on with a target of of ₹1,350 per share.  

  On the other hand, Nuvama Institutional Equities remains cautious, continuing with a ‘Reduce’ stance with a target price of ₹1,050, given the stock’s expensive valuation and a potential further earnings downgrade amid soft steel prices. However, the brokerage sees the deal as "value-accretive" for JSW Steel.

 

At 9:36 AM, JSW Steel share price was trading 0.42 per cent higher on BSE, at ₹1,152.35 per share. In comparison, BSE Sensex was up 0.11 per cent at 85,204.06. Intra-day the stock rose 1.5 per cent to ₹1,165 per share. 

Deal contours

JSW Steel has agreed to sell a 50 per cent stake in BPSL to JFE Steel for ₹15,700 crore in cash, payable in two equal tranches by mid-2026. The deal implies an enterprise value (EV) of about ₹53,000–53,100 crore for BPSL.

 

Emkay Global Financial Services values BPSL at ₹53,000 crore or 11.8x on FY27E, with enterprise value to Earnings before interest, tax, depreciation and amortisation (EV/Ebitda), well above its prior internal estimate of ₹40,500 crore. Meanwhile, Nuvama values BPSL at an EV of ₹53,100 crore at 12.4x FY28E EV/Ebitda.

 

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

 

Ahead of the JV formation, JSW Steel simplified the structure by merging Piombino Steel Ltd (PSL) — the intermediate holding company for BPSL — into the parent. JSTL bought out JSW Shipping & Logistics’ 17.35 per cent stake in PSL via share issuance at an implied equity value of about ₹43,000 crore, resulting in JSW Steel’s promoter stake rising from 45.32 per cent to 46.74 per cent. Post-merger, BPSL will sit inside a 50:50 JV between JSW Steel and JFE Steel.

Sharp deleveraging

Analysts see sharp reduction in debt for JSW Steel post this deal. Emkay estimates ₹37,000 crore of deleveraging following the slump sale and associated debt transfer.

 

Nuvama pegs a net debt reduction of around ₹32,350 crore. According to the brokerage, JFE will pay ₹15,750 crore in two tranches—the first tranche of ₹7,850 crore by Mar’26E and the second tranche of ₹7,850 crore by Jun-26E for its 50 per cent equity share in the new JV. Overall, JSW Steel will receive ₹15,750 crore from JFE along with ₹16,600 crore through debt to be raised in the JV, totalling ₹32,350 crore. 

 

Besides, analysts believe JSW Steel’s consolidated net debt will fall by 50 per cent, and FY28E net debt/Ebitda is likely to improve 1.1x, making the balance sheet “much lighter”, even though the JV’s own debt of about ₹21,500 crore will carry only a letter of comfort from JSW/JFE and no direct recourse to JSW Steel.

JSW Steel’s balance sheet reset

Emkay reckon that the ₹37,000 crore deleveraging resulting from this transaction materially strengthens JSW Steel’s balance sheet ahead of the next expansion cycle, at a time when rising steel demand is expected to push India into a structural deficit over the next 2–3 years. Bringing in JFE Steel as a 50 per cent partner at a healthy valuation validates the asset quality and underscores the rationale for broader restructuring. Collectively, these steps help JSW Steel with the financial and strategic flexibility needed for its next phase of growth and remove the BPSL overhang. 

 

“With BPSL fully deconsolidated and JSW Steel’s 50 per cent stake shifting to equity accounting, its share of profits will flow directly to net earnings while enhancing leverage ratios (with net debt to Ebitda likely coming down to 1.3x from 2x on FY27E)," Emkay noted.

 

Further, according to Nuvama, the deal shall be "value-accretive" for JSW Steel as not only is the stake being sold at a higher value, but it also infuses cash in the business. This deal is likely to enhance JSW Steel’s fair value by ₹37 per share (ceteris paribus).   Motilal Oswal believes with this move, the company aims to reduce debt, infuse advanced technology for high-value steel production, and focus on its plan of expanding steel-making capacity to 50MTPA by FY31.  Disclaimer: View and outlook shared belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.