Nuvama Institutional Equities has downgraded JSW Steel to reduce, assigning a target price of ₹1,050, which implies an 8% downside from the current market price of ₹1,144. The brokerage said the company’s newly signed agreement with Japan’s JFE Steel to form a 50:50 joint venture for Bhushan Power & Steel (BPSL) carries long-term strategic merit but will also lead to lower consolidated earnings from FY28 onwards.
Under the agreement, BPSL — in which JSW Steel currently holds about 83% — will be transferred to the joint venture at an enterprise value of ₹531 billion, corresponding to 12.4x FY28E EV/EBITDA. Nuvama noted that this valuation is meaningfully higher than its previously incorporated estimate of ₹363 billion, signalling that JSW Steel is realising a richer-than-expected value for the asset.
Following the transaction, the brokerage expects JSW Steel’s consolidated FY28E EBITDA to decline by 11%, reflecting the deconsolidation of BPSL’s earnings. At the same time, net debt is projected to fall by 50%, or ₹373.5 billion, materially improving the company’s leverage profile.
Nuvama said the deal remains value-accretive because JSW Steel is divesting its stake at a premium and simultaneously bringing additional liquidity into the business. According to its estimates, the restructuring is likely to enhance JSW Steel’s fair value by ₹37 per share.
However, the brokerage maintained a cautious stance due to the expected reduction in consolidated EBITDA contribution after the JV becomes operational.
Disclaimer: This article is strictly based on the inputs provided and is for news reporting purposes only. It does not constitute investment advice or stock recommendations.
