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Stake sale in JSW Neo could raise USD 1bn

Media reports suggest that JSW Energy plans to raise USD 1bn by monetising its stake in JSW Neo, which has an asset base of 5.9GW and is developing 3.4GWh energy storage, 1GW solar module manufacturing and a 3,800TPA green hydrogen manufacturing facility. With a vision of 20GW capacity by 2030, JSW Energy continues to pursue an opportunistic strategy; it acquired stressed but good-quality Mytrah Energy (1,331MW of wind and 422MW of solar) at an EV of INR 10.5bn. We anticipate that JSW Energy will sell 10% stake in JSW Neo, implying a valuation of INR 880bn-900bn, in line with our valuation. We continue to maintain our BUY rating on the stock, valuing it at an SOTP-based TP of INR 500 implying 13x Sep’25 blended EV/EBITDA.

* Business reorganisation: In FY23, the company completed the reorganisation of its businesses into green and grey. This involved integrating existing and upcoming renewable energy ventures including hydropower, spanning generation, energy storage, PV modules, and green hydrogen/ammonia and its derivatives, all under JSW Neo Energy.

* Vision: The company has a vision to install 20GW generating capacity, complemented by 40GWh/5GW of energy storage capacity by 2030 (10GW expected to be operationalised by CY24).

* JSW Neo: JSW Energy has an installed power generation capacity of 6.8GW, with JSW Neo contributing 3.6GW (1.4GW Hydro/ 1.5GW Wind/ .68GW Solar). In addition to power generation, the company is developing energy storage (3.4GWh locked in; 2.4GWh Hydro Pumped Storage and 1GWh BESS), a 1GW solar module manufacturing unit (allocated under PLI-II), and a 3,800TPA green hydrogen manufacturing facility. The company has signed MoUs for 72 GWh of hydro pumped storage.

* Aggressive expansion: In FY23, JSW Energy acquired a portfolio of 1,753MW (1,331MW of wind and 422MW of solar) of renewable energy generation capacity from Mytrah Energy (India) Pvt Ltd with long-term PPA and an average remaining life of 18 years at an EV of INR 10.5bn, after adjusting for net current assets.

* Capacity under construction and strategic plans: Currently, 2,321MW of assets (240MW of hydro and 2,081MW of wind) are under construction, which the management expects to operationalise in CY24.

* Fundraise: According to media reports, JSW Energy is in advanced stages of raising funds amounting to USD 1bn in tranches by monetising its stake in JSW Neo. We anticipate that JSW Energy will sell 10% stake in JSW Neo, implying a valuation of INR 880bn-900bn, in line with our valuation.

* Valuation: We continue to maintain our BUY rating on the stock, valuing it at an SOTPbased target Price of INR 500 per share. This valuation implies a 13x Sep’25 blended EV/EBITDA, with JSW Neo contributing 88% to the value of JSW Energy.

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CIN Number : L67120MH1986PLC038784