JSW Steel’s Credit Ratings Remain Stable Despite Supreme Court’s Bhushan Steel Verdict

Supreme Court Verdict: Supreme Court has canceled JSW Steel's resolution plan to take over Bhushan Power & Steel Ltd (BPSL) on account of defiance of the Insolvency and Bankruptcy Code. This verdict affects JSW Steel's 2.75 MTPA steel production capacity in Odisha, which represents around 13% of the company's revenue and 10% of its EBITDA.

 

Market Impact: The ruling precipitated a tough response in the stock market, with the JSW Steel stock declining more than 7%. Estimates by analysts are that the valuation of the company can be impacted by 5–9%, but a large part of the negative mood is already built into the share price. Review petitions by JSW Steel and its financiers are likely to be filed to obtain a stay on the order of liquidation.

 

Fitch Ratings' Analysis: In spite of the setback in court, Fitch Ratings has assured that JSW Steel's credit ratings are still intact. The agency attributes the stable outlook to JSW Steel's sound balance sheet, diversified business, and strong cash flow generation as the major factors for the stable outlook. Fitch views the loss of BPSL as within the company's overall financial picture.

 

Financial Flexibility: JSW Steel can recover its original investment in BPSL, even if the process would take time. Its core business is strong, and its financial flexibility should ride out the effect of the verdict.

 

Next Steps: JSW Steel is considering legal recourse, including seeking a review petition, while the government and creditors can also approach for a stay on the liquidation order.

 

Source: Daily Pioneer, CNBC-TV18, Moneycontrol, Economic Times