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JSW Steel`s capex and Bhushan acquisition will spike its debts

JSW Steel`s capex and Bhushan acquisition will spike its debts

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Published on 9th September, 2019

The National Company Law Tribunal (NCLT), on Thursday, approved JSW Steel`s Rs 19,700 crore bid for acquiring bankrupt Bhushan Power and Steel (BPSL), after two-year long insolvency proceedings. However, the verdict came at a time when the steel industry is eyeing at the production cut and cost reductions as domestic economic slowdown started affecting its profitability. Industry experts fear that the acquisition may spike the debt of JSW Steel to alarming levels.

JSW Steel had a net debt of Rs 47,800 crore at the end of June 2019. "The present capital expenditure requirement of Rs 31,000 crore and Rs 19,700 crore acquisition of BPSL may increase the debt to an alarming level. If the company raises 70 per cent of these capital requirements through borrowings, the net debt will go up by Rs 35,000 crore, taking the total debt to around Rs 83,000 crore," industry experts said. The margins of steel companies are falling amid slowdown and global trade war fears, they added.

Seshagiri Rao, Joint Managing Director and Group Chief Financial Officer, JSW Steel, recently (before NCLT`s BPSL verdict came out) told Business Today, "India is an infrastructure deficit country and the domestic demand will remain strong in the long-term. We have huge population and the aspiration of the society is high. That is why we target to become a 45 million tonne (MT) steel company by 2030."

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