Fitch Ratings has placed JSW Steel’s Long-Term Issuer Default Rating of ‘BB’ on Rating Watch Positive following the approval of a joint venture with JFE Steel Corporation. This JV involves the acquisition of steel assets from Bhushan Power and Steel Limited, potentially improving JSW Steel’s EBITDA net leverage. Fitch expects to resolve the Rating Watch Positive upon the JV’s formation, likely by the end of fiscal year 2026.
Rating Watch Positive Placement
Fitch Ratings announced on January 6, 2026, that it has placed JSW Steel Limited’s Long-Term Issuer Default Rating (IDR) of ‘BB’ on Rating Watch Positive (RWP). The ‘BB’ rating on outstanding bonds of JSW Steel and its subsidiary, Periama Holdings, LLC, has also been placed on RWP.
Joint Venture Details
The Rating Watch Positive is a response to the board’s approval to form a 50:50 joint venture (JV) with Japan-based JFE Steel Corporation. The JV will acquire steel assets from Bhushan Power and Steel Limited (BPSL), a JSW Steel subsidiary. This transaction could lead to JSW Steel receiving INR324 billion in cash within six months.
Financial Impact
The influx of capital is projected to improve JSW Steel’s EBITDA net leverage, potentially reaching levels commensurate with a higher rating from fiscal year 2026 through 2028. Fitch expects EBITDA net leverage to reduce by 0.5x – 0.7x over fiscal years 2026-2028 if the JV is formed as proposed.
Key Expectations
Fitch anticipates resolving the Rating Watch Positive once the JV is established after receiving regulatory approvals and satisfying other closing conditions, which JSW Steel expects by the end of fiscal year 2026.
Rationale for the Rating Action
The JV is expected to acquire BPSL’s steel assets for INR244.83 billion by March 2026, funded by INR166.08 billion of debt and equity from JFE. JSW Steel anticipates receiving JFE’s second equity tranche of INR78.75 billion by June 2026. BPSL contributed 10% of JSW Steel’s consolidated EBITDA in fiscal year 2025.
Cash Utilization
JSW Steel plans to use the cash proceeds for deleveraging and growth investments. Fitch will proportionately consolidate the financial statements of the proposed JV, JSW Kalinga Steel Limited (JKSL), in its forecasts.
Standalone EBITDA Margins
Fitch forecasts JSW Steel’s standalone EBITDA margins to rise to INR9,500 per tonne in fiscal year 2026 and INR10,750 per tonne in fiscal year 2027 (fiscal year 2025: INR8,400 per tonne).
Leverage Improvement
JSW Steel’s EBITDA net leverage, including the proportionate consolidation of JKSL, is expected to decrease to 2.6x in fiscal year 2026 and 2.1x in fiscal year 2027 (fiscal year 2025: 4.0x).
Volume Growth
Sales volumes are projected to increase by 6%-10% over fiscal years 2027-2028 (fiscal year 2025: 7%).
Source: BSE
