JPMorgan has reiterated its overweight rating on JSW Steel, assigning a target price of ₹1,250, as it views the company’s newly announced 50:50 strategic joint venture with Japan’s JFE Steel for the Bhushan Power & Steel (BPSL) business as neutral to slightly positive over the medium term. At the current market price of ₹1,144, the brokerage believes the deal delivers meaningful balance sheet gains and operational benefits.
The transaction values the BPSL business at an enterprise value of ₹530 billion, including ₹315 billion in equity and ₹210 billion in debt. According to JPMorgan estimates, this implies an EV/EBITDA multiple of 17x FY26E and 11x FY27E for BPSL—levels the brokerage considers attractive.
JPMorgan highlighted that the structure of the deal will allow JSW Steel to delever its balance sheet by approximately ₹370 billion, reducing the company’s net debt-to-EBITDA ratio by about 0.8x on its estimates. It added that the improved financial position may also strengthen JSW Steel’s ability to pursue accelerated capacity expansion over the coming years.
The brokerage noted that continued collaboration with JFE on high-value steel categories—such as automotive steel and grain-oriented electrical sheets—remains a key strategic advantage of the partnership.
Management expects the transaction to close within 6–9 months, subject to necessary approvals. Key milestones include:
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Slump sale cash consideration of ₹244.83 billion by March 2026, including a first tranche of ₹78.75 billion from JFE.
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Second tranche of ₹78.75 billion by June 2026.
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Deconsolidation of ₹50 billion existing debt and the infusion of ₹160 billion new debt, taking the new entity’s total debt to ₹210 billion.
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Post share swap, the promoter stake in JSW Steel will rise by 1.42% to 46.74%.
JPMorgan said the overall implications of the restructuring are favourable for JSW Steel, improving financial flexibility while preserving long-term collaboration with JFE on premium steel grades.
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.
