CLSA has maintained its ‘Underperform’ rating on JSW Steel, assigning a target price of ₹825, after the Supreme Court struck down the company’s resolution plan for Bhushan Power and Steel Ltd (BPSL) and directed liquidation of the debt-ridden company.
The top court held that the resolution plan submitted by JSW was legally untenable on two key grounds — the use of optionally convertible debentures (OCDs) along with equity to fund the takeover, and failure to implement the plan within the prescribed time frame under the Insolvency and Bankruptcy Code (IBC).
While JSW Steel may be eligible to recover its initial investment in BPSL, CLSA pointed out that uncertainty remains over how much of the capex incurred and EBITDA generated during this period will be recognized or returned. The brokerage estimated a valuation impact of 5–9%, factoring in the loss of access to BPSL’s assets and potential write-offs linked to the failed acquisition.
With JSW Steel’s stock already down 6% on May 2, CLSA believes part of the downside has been absorbed, but legal and operational uncertainties will continue to weigh on investor sentiment. The brokerage warned that recovering even the original capital deployed may be a long, drawn-out process, subject to liquidation proceedings and competing claims.
In the near term, the overhang from the Supreme Court verdict, combined with sector-wide margin pressures from volatile steel prices and higher input costs, could limit upside for JSW Steel’s stock.
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.
