JSW Steel Anticipates Challenges in Achieving Expansion Goals
Sajjan Jindal’s JSW Steel is facing significant hurdles following a recent Supreme Court ruling that invalidated its resolution plan for Bhushan Steel and Power Ltd (BPSL). Analysts predict that this decision could lead to a production cut of approximately 10% and a reevaluation of the company’s capital expenditure plans. The ruling has raised concerns about JSW Steel’s ability to meet its expansion targets and maintain revenue guidance, as the company grapples with the financial implications of the court’s decision.
Supreme Court Ruling and Its Implications
On Friday, the Supreme Court set aside JSW Steel’s resolution plan for BPSL, deeming it illegal and in violation of the Insolvency and Bankruptcy Code (IBC). The bench, consisting of Justices Bela M. Trivedi and Satish Chandra Sharma, criticized the actions of key stakeholders involved in the resolution process, including the resolution professional, the Committee of Creditors (CoC), and the National Company Law Tribunal (NCLT). The court ordered the liquidation of BPSL, highlighting what it described as a “flagrant violation” of the IBC. This ruling has raised alarms among analysts, who believe that the loss of BPSL could significantly impact JSW Steel’s financial health.
Financial Impact on JSW Steel
Analysts estimate that the loss of BPSL, which has a production capacity of 3.5 million tonnes, could severely stress JSW Steel’s balance sheet. The company previously acquired BPSL in 2019 for nearly Rs 20,000 crore, and it was expected to contribute significantly to JSW’s revenue. An analyst from IIFL noted that BPSL generated an EBITDA of Rs 2,400 crore, and its absence would directly affect JSW Steel’s cash flow and debt servicing capabilities. Furthermore, Dhruv Goel, CEO of BigMint, indicated that BPSL accounted for about 10% of JSW Steel’s overall production in India, which could further exacerbate the company’s challenges.
Future Plans and Strategic Adjustments
In light of the Supreme Court’s ruling, JSW Steel may need to reassess its expansion and capital expenditure plans. The company has previously expressed ambitious growth targets, aiming for a capacity of 45 million tonnes per annum (MTPA) by 2030. However, with BPSL’s operations likely to stall, JSW Steel may redirect its focus toward other investments, particularly in Odisha. The company has proposed a 5 MTP plant in collaboration with POSCO and a 13.2 MTP greenfield facility with an investment of Rs 65,000 crore. Analysts suggest that JSW Steel may need to explore additional acquisitions or new projects to meet its growth objectives.
Company’s Response and Next Steps
JSW Steel has acknowledged the Supreme Court’s decision and stated that it will review the ruling and determine its future course of action. The company has not yet responded to inquiries regarding the potential impact of the ruling on its financial performance. As the situation unfolds, stakeholders will be closely monitoring how JSW Steel navigates these challenges and adapts its strategies to mitigate the effects of the Supreme Court’s decision on its operations and growth plans.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
