JSW Steel Entity to Acquire Thyssenkrupp Electrical Steel India for Rs. 4051 Cr.
JSW Steel entity, Jsquare Electrical Steel Nashik Pvt. Ltd., will be raising Rs. 2,600 crore to partly fund the acquisition of Thyssenkrupp Electrical Steel India (tkES India) from Germany-based Thyssenkrupp Group.
Jsquare Electrical Steel Nashik is a subsidiary of JSW JFE Electrical Steel Pvt. Ltd., which in turn is a 50-50 Joint Venture (JV) between JSW Steel and Japan’s JFE Steel Corporation.
Funds to be Raised through Zero-Coupon Bonds
Aforementioned amount to partly fund the Thyssenkrupp acquisition will be raised by Jsquare Electrical Steel Nashik through issuance of 3-year zero-coupon bonds.
These zero-coupon bonds will be raised on 24th January 2025, carrying an implied yield of 9.25%.
Zero coupon bonds are bonds which are available for purchase at a heavy discount on their face value, but pay no interest. Instead, these bonds can be redeemed at the full face value upon maturity (in this case, after 3 years) by the lenders.
Since zero-coupon bonds are effectively instruments to raise debt, the aforementioned amount will form the debt component to partly fund the tkES India takeover.
tkES India to be Acquired for Total of Rs. 4,051 Cr.
Takeover of tkES India was announced in October 2024 by JSW Steel. The total cost of this acquisition was pegged at Rs. 4,051.40 crore.
As for the funding of this acquisition, apart from the aforementioned debt component, JSW Steel and Japan’s JFE Steel Corp. will invest equally in the form of equity to acquire tkES India.
JSW to Assume Centerstage in Indian Electrical Steel Market
Acquisition of Thyssenkrupp’s Indian subsidiary would place JSW Steel as a key player in the Indian electrical Steel market. In fact, tkES India is currently the sole domestic producer of electrical Steel in India, which is produced at its Nashik plant. Therefore, this acquisition would place JSW Steel at the centre of India’s electrical Steel or Cold Rolled Grain Oriented (CRGO) Steel market. Acquisition of tkES India will provide JSW JFE Electrical Steel with necessary technology and market access.
While announcing this acquisition, Mr. Jayant Acharya, Joint Managing Director & CEO, JSW Steel, had explained, “The market for GOES [Grain Oriented Electrical Steel] is growing rapidly. This acquisition will enable the consortium of JSW and JFE to manufacture this product in India and supply it to customers in India and globally”.
Separately, JSW JFE Electrical Steel is already in process of establishing a CRGO Steel plant, which is set to begin production in 2027.
India’s Need to Boost CRGO Steel Production
CRGO Steel is a key component for manufacturing transformers, generators, motors and other electrical equipment. In fact, CRGO Steel makes up about 30-35% of the total raw material in transformers.
tkES India’s Nashik plant has a production capacity of 50,000 Tonne Per Annum (TPA), which is far short of India’s current CRGO Steel demand of about 4,00,000 TPA. Therefore India relies heavily on CRGO Steel imports from countries like Japan, South Korea, Russia and China.
An October 2024 report by Global Trade Research Initiative (GTRI) states that India’s Power Sector faced a 30% shortage of CRGO Steel in FY-24 despite imports. It added that with the current pace of Transmission and Distribution (T&D) network expansion in India, the demand of CRGO Steel is projected to rise. GTRI’s report estimates this demand to grow at around 10-12% annually in light of India’s target of achieving 500 GW of Renewable Power by 2030.
Therefore, India needs to add Electrical Steel production capabilities to cut down on imports, and to close the gap between CRGO demand and supply.
About JSW Steel Ltd.: JSW Steel Ltd. is the flagship company of the JSW Group. The company has manufacturing facilities in India and the US. In FY-24, the company reported a consolidated top line of Rs. 1,75,006 crore.
