Add JSW Steel Ltd For Target Rs. 1,200 by Emkay Global Financial Services Ltd
STL announced a restructuring that unlocks value from BPSL and delivers a sharp balance-sheet reset. JSTL has agreed to sell 50% stake in BPSL to JFE Steel for Rs157bn in cash, payable in two equal tranches, implying an enterprise value of Rs530bn, significantly above our estimate of Rs405bn. This monetization step also delivers a material balance-sheet benefit, with JSTL achieving Rs370bn of deleveraging following the sale and associated debt transfer. We understand immediate deleveraging and getting prepared for the next leg of capacity expansion cycle—at a time when steel consumption growing at 8-9% pa is expected to push the market into a deficit in the next 2–3 years— as key rationale for this transaction. We maintain our estimates and reiterate ADD with a TP of Rs1,200.
BPSL – Transaction contours On 3-Dec-25, JSTL announced a series of interlinked corporate actions aimed at simplifying its group structure, unlocking value from BPSL, and bringing in JFE Steel as a long-term strategic partner. JSTL has agreed to sell 50% stake in BPSL to JFE Steel for Rs157bn in cash, payable in two equal tranches, implying an enterprise value of Rs530bn (EV/EBITDA of 11.8x on FY27E), significantly above our estimate of Rs405bn. The EV comprises Rs315bn of equity value and Rs215bn of debt, the latter including BPSL’s existing external borrowings of Rs50bn and Rs165bn of additional debt to be raised at JSW Sambalpur (the entity that acquired the entire BPSL operations through a Rs245bn slump sale). This restructuring step also delivers a material balance-sheet benefit, with JSTL achieving Rs370bn of deleveraging following the slump sale and associated debt transfer. Ahead of the JFE partnership, JSTL merged Piombino, the intermediate holding company for BPSL, into the parent by acquiring the entire 17.35% stake of JSW Shipping in Piombino at an implied equity value of ~Rs430bn and giving equity of JSTL, resulting in the promoter stake rising from 45.32% to 46.74% in JSTL.
Leaner balance sheet; high growth optionality The Rs370bn deleveraging resulting from this transaction materially strengthens JSTL’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% partner at a healthy valuation validates the asset quality and underscores the rationale for broader restructuring. Collectively, these steps would help JSTL with the financial and strategic flexibility needed for its next phase of growth.
Our view We view this development as positive as it removes the BPSL overhang and enables a meaningful deleveraging. With BPSL fully deconsolidated and JSTL’s 50% 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).
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