India Ratings and Research (Ind-Ra) has affirmed JSW Steel Limited 's (JSWL) Long-Term Issuer Rating and its non-convertible debentures (NCDs) at 'IND AA' while upgrading the outlook to Stable from 'Rating Watch with Developing Implications'. This rating action follows a significant legal development and reflects the company's improving financial metrics.

Key Highlights

• Long-Term Issuer Rating and NCDs affirmed at 'IND AA'
• Outlook upgraded to Stable from 'Rating Watch with Developing Implications'
• Supreme Court upholds JSW Steel's INR 193.50 billion bid for Bhushan Power and Steel Ltd (BPSL)
• Consolidated net adjusted leverage expected to improve from FY26 onwards

Legal Clarity and Operational Continuity

The upgrade in outlook comes after the Supreme Court's judgment on September 26, 2025, which dismissed appeals by erstwhile promoters and certain operational creditors. This ruling upheld JSW Steel's INR 193.50 billion bid to acquire Bhushan Power and Steel Ltd (BPSL) through the corporate insolvency resolution process (CIRP). The court order provides clarity on BPSL's ownership and ensures operational continuity.

Financial Performance and Projections

India Ratings expects an improvement in JSWL's consolidated net adjusted leverage (including acceptances) from FY26 onwards. This positive outlook is supported by:

1. Healthy domestic demand
2. Volume ramp-up from incremental commissioned capacities at Vijayanagar and BPSL
3. Increased backward integration for iron ore and coking coal
4. Reduction in power costs due to increased share of renewable power
5. Higher share of value-added products in the company's sales mix

Recent Financial Metrics

The company's net leverage increased to 4.4x in FY25 due to pricing pressure from low-cost Chinese exports. However, it improved to 3.6x (annualized) in 1HFY26 and is expected to sustain below 3.5x from FY26 onwards.

Expansion Plans and Capex

JSW Steel has outlined significant expansion plans:

• Capex of around INR 761.10 billion over FY26-FY29
• Aim to increase total capacity in India to 42 mtpa by September 2027
• Further expansion to 50 mtpa planned by FY31

The capex includes brownfield capacity expansion in Vijayanagar and BPSL, Dolvi phase III expansion, mining infrastructure development, and expansion of downstream capacity.

Liquidity Position

As of September 2025, JSWL maintained a strong liquidity position:

• Unencumbered cash and cash equivalents: INR 186.00 billion
• Unutilized working capital lines: INR 330.00 billion
• Undrawn term loan: INR 53.00 billion

The company faces scheduled repayments of INR 67.50 billion in 2HFY26, INR 169.00 billion in FY27, and INR 171.00 billion in FY28. India Ratings expects JSWL to refinance part of its debt maturities, given its track record of raising funds through capital markets and banks.

Outlook and Sensitivities

A positive rating action could be triggered if the consolidated net adjusted leverage improves to 2.5x on a sustained basis, coupled with a reduction in refinancing needs. Conversely, negative rating action may occur if there's higher-than-expected debt-funded capex or acquisitions, a substantial decline in capacity utilization and EBITDA per tonne, or if the adjusted net leverage stays above 3.5x on a sustained basis.

JSW Steel's upgraded outlook reflects its strong business profile, improving financial metrics, and strategic expansion plans. The company's ability to maintain its leverage ratios and successfully execute its capex plans will be crucial for its future credit profile.

JSW Steel , a leading Indian steel manufacturer, is reportedly in talks to sell up to 50% of its stake in Bhushan Power & Steel Ltd (BPSL), signaling a potential shift in its strategic holdings. This move could reshape the landscape of India's steel industry and attract significant foreign investment.

Potential Stake Sale

JSW Steel is currently exploring options to divest up to half of its ownership in BPSL. According to sources, Japan's JFE Steel has emerged as the frontrunner to acquire this substantial stake. This potential deal underscores JSW Steel's efforts to forge strategic partnerships that could enhance its global competitiveness and operational efficiency.

Strategic Rationale

The company's strategy appears to be focused on:

1. Enhancing scale and efficiency
2. Improving global competitiveness
3. Potentially bringing in a financial or strategic investor

While JSW Steel has acknowledged that it evaluates various opportunities, including potential collaborations, the company has refrained from commenting on specific speculations regarding the stake sale.

BPSL Acquisition and Capacity

Legal Developments

The journey of BPSL under JSW Steel's ownership has faced legal challenges:

• The Supreme Court ordered BPSL's liquidation
• Subsequently, the Supreme Court reversed its earlier decision, reinstating JSW Steel's acquisition

This reversal has allowed JSW Steel to proceed with its plans for BPSL's revival and strategic development.

Implications

The potential stake sale in BPSL could have several implications:

1. Increased foreign investment in India's steel sector
2. Potential technology and expertise transfer if JFE Steel acquires the stake
3. Realignment of JSW Steel's portfolio and strategic focus

As this situation develops, stakeholders in India's steel industry will be watching closely to see how this potential deal might influence market dynamics and competitiveness in the sector.