JSW Steel forms JV with Japanese major; to invest ₹5,500 cr in Karnataka

Iron and steel major JSW Steel has signed a 50:50 joint venture with Japan-based JFE Steel Corporation, with the company looking at ₹5,500 investment to set up a plant in Karnataka. The collaboration will form the first company to have end-to-end manufacturing of grain-oriented electrical steel products in India.

“The new company JSW Electrical Steel Private Ltd, to be renamed JSW JFE Electrical Steel Private Ltd, will have its manufacturing base in district Bellary, Karnataka, and will be set up with a planned investment of ₹5,500/- crores,” JSW Steel says via an exchange filing.

The company says a groundbreaking ceremony, marking the initiation of this partnership was held on February 12, 2024. The facility aims to start production in the fiscal year 2027 and plans to further expand its capacity to meet the growing market demand for grain-oriented electrical steel in India.

The company says the JV will cater to the surging domestic demand for grain-oriented electrical steel and “contribute significantly” to the country's energy infrastructure.

“...the Company and JFE have been allotted equity shares of JSWESPL at par after receipt of necessary regulatory approvals for the joint venture. Post this allotment, the Company and JFE hold 50 Lakh equity shares of ₹10 each in JSWESPL. Consequently, JSWESPL has ceased to be a subsidiary of the Company and is now a 50:50 joint venture between the Company and JFE and is proposed to be renamed as JSW JFE Electrical Steel Private Limited subject to necessary approvals,” the filing adds.

Notably, “grain-oriented electrical steel” plays a pivotal role in the production of energy-efficient transformers. Whether in laminated, wound, or punched sheet form, it serves as the essential core material for distribution transformers, power transformers, and small transformers.

JSW Steel stock is trading flat at ₹811.60, up 0.15%, on the BSE today. At the current level, the stock is trading 9.3% down compared to 52-week high of ₹895.60 touched on December 28, 2023. Its m-cap stands at ₹1.98 lakh crore.

JSW Steel's Q3 FY24 profit surged to ₹2,416 crore, up from ₹1,234 crore in the year-ago period. The company's revenue stood at ₹33,310 crore for the third quarter, up from ₹30,935 in the year-ago period. JSW Steel’s Q3FY24 EBITDA was slightly below analysts' forecasts. In Q3FY24, its consolidated sales volumes stood at 6 million tonnes, lower by 5% QoQ, due to weak retail demand during the quarter.

IDBI Capital has valued the stock at an "EV/EBTIDA multiple of 6x FY26, earlier 6x FY25, EBITDA to derive a target price of ₹829 (earlier ₹786) and maintain HOLD rating on the stock".

Bank of Baroda Capitals, in its latest report, says: JSW Steel's Q3 was below consensus and also weaker than peers amid higher competitive pressure from imports and lower exports. "Near-full valuation makes for unfavourable risk-reward; maintain HOLD with minor change in TP to ₹830 (from ₹840)."