Following the Supreme Court’s decision to scrap JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel and direct creditors to return the amount within two months, brokerage Nuvama Institutional Equities believes the company is likely to file a review petition, seek a stay order, and appeal to a larger bench.
JSW Steel had paid ₹197 billion (₹19,700 crore) to acquire Bhushan Power under the Insolvency and Bankruptcy Code (IBC), a transaction now under question after the apex court ruled that the resolution plan violated IBC norms—both in terms of timely implementation and the use of optionally convertible debentures (OCDs) as part of the funding structure.
Despite the legal setback, Nuvama maintains that the sharp fall in JSW Steel’s stock price on May 2 already factors in much of the negative news. The brokerage further opines that it will be extremely difficult for the consortium of creditors to unwind the complex transaction, especially given the time elapsed and capacity upgrades already undertaken by JSW Steel.
In a worst-case scenario, assuming the company loses control of Bhushan Power and receives only the ₹19,700 crore back, without any compensation for its post-acquisition investments, Nuvama estimates a reduction of ₹114 billion (₹47/share) in its fair value.
The brokerage expects the legal process to be protracted and does not rule out interim relief through a stay or partial reversal of the ruling. Until more clarity emerges, the case will remain a legal and investor overhang for India’s largest private sector steelmaker.
Disclaimer: The above views are those of the brokerage and not the publication. Investors are advised to consult a certified financial advisor before making investment decisions.
