Prolonged uncertainty awaits JSW Steel after Supreme Court rejects resolution plan for Bhushan Power
Summary
JSW Steel shares fell 7% after the Supreme Court rejected its insolvency plan for BPSL, citing violations of the IBC. While JSW may receive its acquisition price, uncertainty looms over investments in capacity expansion and potential de-rating by ESG-conscious investors.JSW Steel Ltd’s shares have lost 7% after the Supreme Court rejected its insolvency resolution plan for Bhushan Power & Steel Ltd (BPSL), citing gross violation of provisions of the Insolvency and Bankruptcy Code (IBC) and ‘mala fide’ intentions on the part of the company. JSW acquired BPSL for ₹19,700 crore in March 2021, which implied a recovery of about 40% for financial creditors.
As per the court’s ruling, JSW is expected to receive its acquisition price, although this could be a long-drawn process.
What are the other implications? BPSL contributed 13% of JSW’s consolidated volumes and 10% of Ebitda for the nine months ended December (9MFY25). Its capacity was ramped up to 4.5 million tonnes per annum (mtpa) by December-end from 2.75 mtpa at the time of acquisition.
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The prospects of recovering the investments made towards capacity expansion become uncertain now. As Nuvama Institutional Equities said, “In the worst case, our fair value shall be reduced by ₹11,400 crore ( ₹47 per share), assuming JSW loses control over BPSL and receives only about ₹19,700 crore paid to creditors and does not receive even the investment made to expand the capacity from 2.75 mtpa to 4.5 mtpa."
The company could get de-rated as global investors that have an ESG (environmental, social, and governance) mandate may reduce their exposure after the Supreme Court’s judgement criticising the conduct of all stakeholders during the IBC process for procedural lapses.
JSW’s options
All said, JSW is staring at uncertainty on several grounds. According to Kotak Institutional Equities, one scenario could be that JSW participates in the liquidation process and wins back the asset by paying an incremental ₹10,000 crore (fair value of asset as on today versus its acquisition price).
Here, the Supreme Court touched upon the issue of whether JSW Steel was a ‘related party’ as it had bid for a coal mine together with BPSL in 2008. This may create legal hurdles under the IBC provisions. JSW can file a review petition, but the probability of a reversal in the court’s stance is low.
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How the situation unfolds is crucial, but in the interim, it would act as an overhang on the stock, which had gained 15% in 2025 on strong prospects for Q4FY25, till the judgment. Plus, it does not help that some analysts such as those from Incred said JSW’s consensus Ebitda projections for FY26-27 are too optimistic—potentially 30% above realistic levels.
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