Shares of JSW Energy Limited surged by 6.26% to ₹664.95 during early trading on December 30, 2024, after its wholly-owned subsidiary, JSW Neo Energy Limited, announced the acquisition of O2 Power, a renewable energy platform. The deal is valued at an enterprise valuation of ₹12,468 crore ($1.47 billion), marking JSW Energy’s largest acquisition to date.
Details of the Acquisition:
- Platform Capacity: O2 Power has a renewable energy portfolio of 4,696 MW, including:
- 2,259 MW operational by June 2025.
- 1,463 MW under construction.
- 974 MW in the pipeline, slated for commissioning by June 2027.
- Tariff and Location: The platform operates at a blended average tariff of ₹3.37/KWh with a remaining project life of 23 years, spread across seven resource-rich states in India.
- Impact on Capacity: The acquisition will boost JSW Energy’s total locked-in generation capacity by 23%, from 20,012 MW to 24,708 MW.
Management Commentary:
Sharad Mahendra, Joint Managing Director and CEO of JSW Energy, highlighted the acquisition as a “landmark” move that strengthens JSW Energy’s positioning as a leading player in India’s renewable energy sector. He also emphasized the synergy and growth potential from integrating O2 Power’s high-quality assets into JSW’s portfolio.
Brokerage Response:
Motilal Oswal Securities Limited (MOSL) has maintained its “buy” rating on JSW Energy with a target price of ₹810, indicating a potential upside of 29% from the current levels. Key highlights from the brokerage note include:
- The acquisition at approximately 7x EV/EBITDA is viewed as a significant value addition, as renewable energy companies currently trade at 15x EV/EBITDA.
- MOSL estimates a potential value unlocking of up to ₹57 per share upon deal completion.
While the acquisition will lead to a temporary rise in the company’s net debt/EBITDA ratio to 5.4x by FY26 (up from the current 4.7x), analysts consider it a manageable increase due to the company’s robust growth trajectory.
