JSW Steel shares rebounded sharply from the day’s lows to trade over 2 per cent higher on Monday, following a Supreme Court order to maintain the status quo in the Bhushan Steel case.
The steel manufacturer’s stock rose as much as 2.71 per cent during the day to ₹1,035 per share, the biggest intraday gain since May 12 this year. The stock trimmed gains to trade 2 per cent higher at ₹1,030 apiece, compared to a 0.48 per cent advance in Nifty50 as of 1:30 PM.
Shares of the company remained range-bound this month and have recovered nearly 10 per cent from its lows of ₹934, which it hit earlier this month. The counter has risen 14.5 per cent this year, compared to a 5.6 per cent advance in the benchmark Nifty50. JSW Steel has a total market capitalisation of ₹2.5 trillion.
JSW Steel’s resolution plan for Bhushan Power in limbo
The Supreme Court on Monday directed that the status quo be maintained on Bhushan Power & Steel for now. The court issued the direction following a plea filed by JSW Steel, as it seeks a stay on liquidation proceedings for Bhushan Power.
Earlier this month, India’s top court set aside a resolution plan submitted by JSW Steel for 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. The bench said the CoC was found to have approved JSW’s resolution plan without proper application of its commercial wisdom.
JSW Steel had won the bid to acquire Bhushan Power & Steel under the IBC for a little less than ₹20,000 crore. The tribunal had initiated the corporate insolvency resolution process (CIRP) against BPSL on July 26, 2017, admitting the plea of its lead lender, Punjab National Bank (PNB).
‘Adverse’ impact on topline
The top court’s ruling against the steel manufacturer’s resolution plan for BPSL takeover is likely to have an adverse bearing on the financials, which may witness a 13 per cent drop in revenues, according to ratings firm CreditSights. JSW Steel may also lose its competitiveness along India’s mineral-rich east coast, where BPSL’s steel plant is located, the FitchSolutions company said.
CreditSights said if JSW Steel fails in its attempts to save the BPSL asset, the company will have to surrender BPSL back to the NCLT, resulting in a deconsolidation of BPSL’s financials.
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