JSW Steel eyes sharp debt reduction through joint venture deal with Japan’s JFE

JSW Steel, led by billionaire Sajjan Jindal, will transfer the steel assets of Bhushan Power & Steel Ltd (BPSL) to a new 50:50 joint venture with Japan’s JFE Steel Corp, in a deal expected to unwind its sprawling balance sheet as it expands, JSW Steel announced on Wednesday.

Agreement on which JFE is based ₹The ₹15,750 crore commitment is expected to reduce JSW Steel’s debt by almost half and secure BPSL assets under a clean joint venture structure. This will be the second joint venture between the two companies; the other will be JSW JFE Electrical Steel.

In a complex transaction expected to be completed in the first half of FY27, JSW Steel will initially acquire: ₹24,283 crore cash was generated from the flash sale of BPSL’s steel assets to a subsidiary of JSW Sambalpur Steel Limited, Swayam Saurabh, the company’s chief financial officer, said in a press conference on Wednesday. JFE will provide funding ₹7,875 crore from this transaction.

what remains ₹16,608 crore will be raised as new debt by BPSL and JSW Sambalpur Steel, according to company executives who spoke on condition of anonymity.

Then JFE will pay ₹7,875 crore will be re-transferred to accounts in the second tranche JSW Steel. In total, after adjusting expenses, JSW Steel will receive: ₹32,250 crore for BPSL’s steel assets.

another one ₹5,000 billion BPSL debt will be moved from JSW’s consolidated books to joint venture structure, which will eventually offload India’s largest steel company by capacity ₹37,250 crore. Saurabh said this will help increase JSW Steel’s debt to EBITDA ratio by almost 1x. Ebitda refers to earnings before interest, taxes, depreciation and amortization.

The money will be used to reduce BPSL’s debt and help it grow even as it retains its Odisha-based 4.5 million tonnes per annum (mtpa) steel plant.

JSW Steel’s total debt at the end of the July-September 2025 quarter was: ₹79,153 crore, per data management stated during the post-earnings call.

Mint It had reported last month that JSW Steel was in advanced talks with JFE for a joint venture, citing an executive with knowledge of the development.

JSW Steel had acquired BPSL from the bankruptcy court in 2021. The move comes after the Supreme Court in September upheld the decision of India’s largest steelmaker. ₹19,700 crore bankruptcy plan This after creditors such as Bhushan Power and Steel Ltd, former promoter Sanjay Singal, Kalyani Group’s Torsteel, Odisha state and other stakeholders objected to the plan in many forums, citing irregularities and repeated delays.

Since then, JSW has managed to turn around BPSL’s operations and increase its capacity from 2.75 mtpa to 4.5 mtpa. “The patient unit, which used to be 2.75 mtpa, now boasts an increased capacity of 4.5 mtpa and as a profitable company employing 25,000 people,” the company said in a statement.

According to JSW Steel’s joint managing director and CEO Jayant Acharya, BPSL’s capacity will be increased to 10 mtpa by 2031, in addition to JSW Steel’s capacity expansion target of 51 million tonnes in the same year.

keeping things clean

Saurabh said the complex deal structure was designed to make the deal clean for the Japanese partner. “Given the BPSL and its track record, it was much more comfortable for the JFE to do it in a clean structure with no track record,” he said.

JSW Steel benefits by reducing debt, strengthening its strength At the media briefing, Acharya said that while the joint venture will expand its balance sheet and accelerate its growth, at the same time, the joint venture will separately chart its own growth path with technologically intensive, high-value products.

A stronger balance sheet allows the company to pursue larger expansion plans, from increasing its India capacity to 51 million tonnes and beyond to ramping up upcoming projects in Vijayanagar, Paradip and its new green steel plant.

Joint venture structure

In the same media briefing, Kaustubh Kulkarni, JSW’s group head of banking mergers and acquisitions and strategic finance, said that in the joint venture, JSW and JFE will have equal control, equal board representation and shared operational responsibilities. He added that JSW will lead areas where local experience is vital, while JFE will lead high-tech functions.

“This is a strategic investment for JFE to participate in India’s growth story. JSW will be able to reduce its balance sheet by: ₹37 billion ( ₹37,000 crore through a mix of fund infusion and deconsolidation that will help them accelerate their growth plans,” said Sumangal Nevatia, director, Kotak Securities.

Long history of JSW-JFE partnership

Of course, JFE first invested over $1 billion in JSW Steel in 2010, when the Indian steelmaker was recovering from bankruptcy in the late 1990s and trying to cut debt. The investment not only helped JSW strengthen its balance sheet but also gave it access to the Japanese steelmaker’s many automotive customers.

The two steel companies had later decided to limit JFE’s stake in JSW to 15%. This understanding holds true until the day JSW Steel accumulates significant debt while rapidly expanding its production capacity in India. JFE’s investment in a subsidiary of JSW Steel will ensure the cap is maintained even as the steelmaker gains access to Japanese capital.

On: ₹15,750 crore, this is one of the largest foreign direct investments by a Japanese firm in India and Sumitomo Mitsui Banking Corporation invests ₹13,483 crore for 20% stake in Yes Bank. Other significant investments by Japanese firms in India include Daiichi’s $4.6 billion investment to acquire a 64% stake in Ranbaxy in 2008 and NTT Docomo’s $2.7 billion investment to acquire a 26.5% stake in Tata Teleservices in 2009.