The board of Jindal Steel and Power (JSPL) on Tuesday authorized the divestment of its 96.4% stake in the company’s subsidiary Jindal Power (JPL) for Rs 3,015 crore to Worldone Private, which is owned by JSPL’s promoter group.
Apart from lowering debt by about Rs 5,000 crore, this deal will enable JSPL concentrate on its steel-producing operations with a deleveraged balance sheet and do away with capex liabilities of about Rs 2,500 crore associated to environmental compliance. The conclusion of this associated party transaction, nevertheless, is topic to many approvals.
JPL runs coal-based thermal energy plants with cumulative installed capacity of 3,400 megawatt (MW) in Tamnar, Chhattisgarh. The corporation won Chhattisgarh’s Gare Palma IV/1 block in the maiden auction for industrial coal mines in November 2020. Recently it appointed former Coal India chief Anil Kumar Jha as its new chairman. The coal block is positioned close to JSPL’s Raigarh steel plant and the Tamnar energy plant.
The upper management of JSPL has reiterated many time its target to decrease net debt to Rs 15,000 crore by FY23-finish. JSPL has also indicated that will not incur any capex till it reaches targeted debt levels. At the finish of September 2020, immediately after JSPL sold its 49% stake Oman-based steel organization, the company’s net debt stood at about Rs 28,900 crore. JSPL had earlier entered into a definitive agreement to sell a 1,000 MW thermal energy plant from JPL portfolio to JSW Energy, but the deal was not completed.
“Looking to the future, JSPL will be a key growth driver in the Indian steel industry and will now focus on undertaking expansion of its Angul steel plant from 6 million tonnes per annum (MTPA) to 12 MTPA,” VR Sharma, the company’s managing director mentioned.
Analysts at Investec Capital Services noted that “(JSPL’s) management has walked the talk on balance sheet deleveraging, and we would be interested to see timelines on capex, target balance sheet ratios and technology adoption from an environmental, social, and corporate governance perspective”.