JSW Steel may face challenges in meeting expansion target after SC order on BPSL: Analysts

JSW Steel faces challenges after Supreme Court rejects Bhushan Steel resolution plan, impacting expansion and revenue goals.

Sajjan Jindal-led JSW Steel may face challenges in meeting its expansion target and maintaining revenue guidance after the Supreme Court judgement that rejected its resolution plan for Bhushan Steel and Power Ltd (BPSL), say analysts.

The company may also see a production cut of around 10% besides rejig in capital expenditure plans in view of the huge amount paid to the creditors of debt-laden BPSL, they said.

The Supreme Court on Friday set aside a resolution plan submitted by JSW Steel for Bhushan Steel and Power Limited (BSPL), holding it illegal and in violation of the Insolvency and Bankruptcy Code (IBC).

A bench comprising Justices Bela M Trivedi and Satish Chandra Sharma criticised the conduct of all key stakeholders in the resolution process -- the resolution professional, the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT) -- for enabling what it termed a "flagrant violation" of the IBC, and ordered the liquidation of BSPL under the IBC.

In 2019, JSW Steel won the bid to acquire Bhushan Power & Steel under the IBC for a little less than ₹20,000 crore. Later, in a letter to BPSL employees, Jindal had said, "Your contribution will be key in bolstering our ambitious growth plans of achieving 45 MTPA capacity well ahead of the 2030 timeline.

The synergies we draw will also play a pivotal role in transforming the lives of millions of our stakeholders." Speaking with PTI, an analyst at IIFL said BPSL has a capacity of 3.5 million tonne and if it goes from the hands of JSW Steel then it will definitely put stress on the balance sheets of JSW Steel.

"BPSL was generating ₹2,400 crore EBIDTA, if it goes then an EBIDTA of ₹2,400 crore vanishes straight away. It will impact JSW Steel's cash flow making debt servicing a problem. Besides revenues may also be impacted," the analyst said requesting anonymity.