The shares of this company plunged sharply after if found that one of its leading beneficiaries was tied up in the proceedings of the Supreme Court for its resolution plan. In this article, we will look at the details.
With a market capitalisation of Rs 2,36,512 crores, the shares of JSW Steel Ltd are currently trading at Rs 967 per share, down by 10 percent from its 52-week high of Rs 1,075 per share. The stock has delivered a positive return of 434.51 percent in the past five years.
Why did the stock plunge?
On Friday, the Supreme Court announced that it had held the acquisition of Bhushan Power & Steel Ltd (BPSL) by JSW Steel Ltd as illegal and ordered the liquidation of the steelmaker.
JSW Steel had won the bid to acquire Bhushan Power & Steel under the Insolvency and Bankruptcy Code for Rs 19,700 crore. The Tata group and UK UK-based Liberty group were some of the bidders participating in it.
In 2020, the Enforcement Directorate (ED) accused BPSL of a case in money laundering issue related to a fraud of Rs 47,158 crores. It was dragged to insolvency proceedings by Punjab National Bank after it failed to pay the dues in the stipulated time frame, which the bank looks to recover from BPSL under debt resolution in NCLT.
The Supreme Court has directed the liquidation of Bhushan Power and Steel, turning down JSW Steel’s takeover proposal on two major grounds.
Firstly, JSW employed a combination of equity and optionally convertible debentures for the acquisition, whereas the Court instructed that it must be carried out exclusively through equity.
Secondly, JSW did not implement the resolution plan within the stipulated time frame. Legal adviser HP Ranina said that JSW’s only course of action at this point is to move a review petition and pledge to deploy only equity.
JSW Steel had bought a 49% stake in Bhushan Power and Steel under the Insolvency & Bankruptcy Process in 2021, acquiring a 2.75 MTPA steel-making facility in Odisha. By October 2021, JSW Steel had raised its stake to 83%. Bhushan Power and Steel presently contributes to around 10% of JSW Steel’s EBITDA and accounts for around 12.5%–13% of its total 37.5 MTPA capacity.
Written by Satyajeet Mukherjee
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