JSW Steel, JFE to form 50:50 JV for BPSL steel business at ₹15,750 crore

Sajjan Jindal-led JSW Steel and JFE Steel Corporation will jointly own and operate the steel business of Bhushan Power and Steel Ltd (BPSL) under an equal partnership, with the Japanese steelmaker acquiring 50 per cent in the joint venture for ₹15,750 crore.

 

The steel business undertaking of BPSL, a subsidiary of JSW, will be transferred to the joint venture, JSW Kalinga, by way of a slump sale for a cash deal of ₹24,483 crore.

 

JFE will invest ₹15,750 crore in two tranches for its 50 per cent.

 

The deal is aimed at bolstering the growth of the two steelmakers, whose partnership goes back to 2009, when they signed a comprehensive agreement.

 

 

In 2010, the Japanese steel major had picked up 14.99 per cent in JSW Steel.

 

JSW Steel Joint Managing Director and Chief Executive Officer (CEO) Jayant Acharya described the deal as a “double engine”, allowing it to deleverage and pursue its path of growth.

 

“This transaction involves a series of steps. We are aiming to create joint control by March,” he added.

 

The joint venture will have the capability to go to 10 million tonnes (mt) and beyond in the future years.

 

In a statement, Masayuki Hirose, president and CEO, JFE Steel Corporation, said that relations between the two companies were entering a new phase.

 

“Since we signed the strategic comprehensive alliance agreement with JSW in 2009, we have engaged in collaborations and partnerships, including capital participation.”

 

“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.”

 

For JSW Steel, which has set a capacity target of 51 mt by FY31, the transaction would help it grow in a financially “prudent” manner.

Acharya said JSW Steel expected a gross earning of ₹32,350 crore, which includes the ₹24,483 crore and a tranche from the JFE transaction. Deleveraging will be of ₹37,250 crore as debt of close to ₹4,900 crore moves to the JV.

 

The deal is structured in a way such that the promoter entities will not get cash equity. “The promoter parties will get an exit with JSW Steel shares. The promoter holding in JSW Steel will go up by about 1.4 per cent,” he added.

 

JSW Steel’s net debt as of September 30 had stood at ₹79,153 crore, which, Acharya said, would come down substantially.

 

JFE said in its statement the joint venture planned to expand crude steel production at the integrated steelworks to 10 mt by 2030. 

It has the land necessary to do this expansion. There is also the potential to expand capacity at the integrated steel works further to 15 mt to make it one of the largest integrated steel facilities in India, it added.

 

BPSL owns an iron ore mine and an integrated steel plant with a crude steel production capacity of 4.5 mt per year.

In FY25, BPSL’s revenue from operations stood at ₹21,440 crore.

 

JSW Steel had acquired the debt-laden company in 2021 for ₹19,700 crore under the Insolvency and Bankruptcy Code (IBC). Its capacity then was 2.75 mt.

 

The partnership with JFE will not be JSW Steel’s only collaboration with a foreign entity. As the company pursues its expansion plans, it has an agreement with South Korea’s POSCO to set up a 6 mt a year integrated steel plant in India.