JSW Steel shares sink 5% amid legal blow; what happens next?

JSW Steel’s Rs 19,700-crore plan to acquire BPSL has been scrapped by the Supreme Court, which termed the funding structure “illegal” and cited failure to meet timelines. The apex court has directed liquidation of Bhushan Power and Steel Ltd under the IBC process.

JSW shares slumped 5.02 per cent intraday to Rs 967.80 on the NSE following the verdict. The company had acquired a majority stake in BPSL in 2021, but the resolution plan backed by a mix of equity and optionally convertible debentures was flagged for violating insolvency rules.

The company said it is reviewing the order and will decide next steps after consulting legal counsel. The move not only derails the multi-year acquisition but could also set precedent for how funding structures are evaluated in future insolvency resolutions.

The ruling raises fresh uncertainty for creditors, employees, and the steel plant’s 2.75 mtpa operations in Odisha.

SC flags illegal funding structure, delay in implementation

The apex court held that the resolution plan violated the Insolvency and Bankruptcy Code (IBC) as JSW had used a hybrid structure mixing equity with optionally convertible debentures (OCDs) to fund the deal. The court also took strong objection to delays in implementing the resolution, breaching timelines stipulated under IBC.

While the plan had earlier received clearance from BPSL’s Committee of Creditors (CoC) and the National Company Law Appellate Tribunal (NCLAT), the Supreme Court’s judgment nullifies the entire process.

JSW to review legal options after court order

JSW Steel said it would assess the ruling once the official order is available. “We are yet to receive the formal copy of the order to understand the grounds for rejection in detail. Once we review the same with our legal advisors, we will decide our next steps,” the company said in a statement to exchanges.

Setback to insolvency resolution ecosystem

JSW Steel had initially acquired a 49 per cent stake in BPSL in 2021, eventually raising it to 83.3 per cent. The acquisition added 2.75 mtpa of capacity in Odisha. However, the transaction was entangled in legal trouble after the Enforcement Directorate linked BPSL to a Rs 47,204 crore fraud case in 2020.

Although the Delhi High Court quashed those proceedings earlier this year, the SC verdict resets the clock, potentially impacting thousands of creditors, employees, and future IBC resolutions.