Bhushan Power Deal Hits Legal Roadblock

Image Source: The Economic Times

JSW Steel Limited revealed a major fund-raising announcement, getting board sanction to raise up to ₹7,000 crore through warrants, equity shares, or convertible securities-backed non-convertible debentures (NCDs). This follows as the company considers legal remedies after the Supreme Court recently rejected its acquisition proposal for Bhushan Power and Steel Limited (BPSL).

Fundraising Approval

The JSW Steel board has okayed raising as much as ₹7,000 crore (about $840 million) by means of a mix of non-convertible debentures (NCDs) with warrants, equity shares, or convertible securities.
The facilitatory resolution gives the company freedom of choice in the instruments of raising funds, with warrants possibly convertible into equity shares later on.
The step is to strengthen JSW Steel's balance sheet and aid in future expansion or operational requirements.

Legal Reversal over Bhushan Power Takeover

The Indian Supreme Court has struck down JSW Steel's resolution plan for acquiring Bhushan Power and Steel Limited due to breaches of the Insolvency and Bankruptcy Code (IBC).
The court directed the liquidation of BPSL, terming the process and the actions of the resolution professional, Committee of Creditors (CoC), and the National Company Law Tribunal (NCLT) responsible for facilitating "flagrant violation" of the IBC.
JSW Steel's proposal was discovered non-compliant with IBC provisions that are obligatory and did not sufficiently safeguard the interest of creditors.

JSW Steel's Response and Next Steps

JSW Steel is considering all legal remedies to oppose the Supreme Court ruling, including filing a review or curative petition.
The firm said that it will take a final call on the next step after a careful examination of the court order with its counsel.
BPSL is an important asset for JSW Steel, accounting for more than 12% of its yearly production and approximately 10% of its earnings before interest and taxes, and thus the legal ruling is going to be crucial for its strategic direction in the future.

Strategic Context

The fund-raising drive comes on the heels of other JSW Group firms making similar gestures, as part of a larger strategy to raise funds for expansion and acquisitions in a competitive market.

The legal confrontation over BPSL highlights the intricacies and risks of large-scale insolvency-led acquisitions in India's steel industry.

Sources: Moneycontrol, The Hindu Business Line, JSW Steel Annual Report, Economic Times Legal