Japan’s JFE Steel will invest ₹15,750 crore to pick up a 50 per cent stake in the steel business of Bhushan Power & Steel Ltd, ushering in fresh foreign direct investment in the Indian steel sector.
BPSL is majority owned by Sajjan Jindal-led JSW Steel, which holds an 82.65 per cent stake in the Odisha-based steel maker, which has primary steelmaking capacity of 4.5 million tonne (mt).
JFE, which is the single largest non-promoter shareholder in JSW Steel with a 15 per cent stake, will invest in BPSL’s steel undertakings in two equal tranches.
JSW had acquired BPSL, which has a steel processing unit on Delhi Road near Calcutta, in 2021 for ₹19,700 crore from the insolvency court and turned around the loss-making unit. The Sajjan Jindal company then ramped up capacity to the present level, which now employs 25,000 people.
JSW Steel said the cash proceeds from the transaction would strengthen the balance sheet of the company and provide a clear runway for growth in a financially prudent manner across business cycles.
“The overall deleveraging which will take place post completion of the transaction is about ₹37,250 crore. The deal will accelerate our journey beyond 50 mt,” Jayant Acharya, joint managing director & CEO, told The Telegraph in a telephonic conversation.
According to the deal contours, JSW Steel will transfer BPSL’s steel business, including the iron ore mine, to an entity by a slump sale for ₹24,483 crore. JFE will then pick up a 50 per cent stake in that entity by investing ₹15,750 crore. Moreover, the debt of ₹4,900 crore will also be moved towards the JV entity.
The cash component will include consideration of the slump sale and half of JFE’s purchase value. The other half of ₹7,875 crore from JFE’s investment would take the combined cash inflow to ₹32,358 crore, which JSW Steel will get, Acharya said. The overall deleverage would also take into account the debt shift. JSW’s net debt stood at ₹79,153 crore at the end of September 30.
The promoter entity, which held 17.35 per cent of BPSL, will get JSW Steel shares following the transaction. Consequently, their holding in JSW Steel will go up by 1.4 per cent to 46.74 per cent. The Telegraph had reported on the potential transaction on November 11.
Growth frontier
With the balance sheet in a stronger place, the company said it would pursue growth opportunities in Vijaynagar, Paradip and Salav in a financially prudent manner and target reaching 50 MT by 2031.
Masayuki Hirose, president and CEO of JFE Steel Corporation, said that the relationship between JSW and the Japanese company is entering a new phase.
“Since we signed the strategic comprehensive alliance agreement with JSW in 2009, we have engaged in various collaborations, including capital participation; licensing of manufacturing technology for automotive steel and non-oriented electrical steel sheets; and a JV for the manufacturing of grain-oriented electrical steel sheet,” he recalled.
JFE said the JV plans to expand crude steel production at BPSL to 10 MT by 2030 and it already has the land to do so. There is also a potential to take the capacity to 15 MT in future to make it one of the largest integrated steel facilities in India. JSW said it would remain invested in the JV with JFE and participate in BPSL growth story going forward.