JSPL to Separate Power Business to Worldone for Rs.7,401 crore

On 03-Sep, shareholders of Jindal Steel & Power (JSPL), approved the proposal to sell 96.42% stake in Jindal Power Limited to Worldone. It must be noted that Worldone is a promoter group company of the Jindal family. The special resolution was passed by shareholders of JSPL with 97.12% votes supporting the resolution.

The consideration of Rs.7,401 crore will entail two parts. It will entail a cash pay-out of Rs.3,015 crore to JSPL. In addition, Worldone will also assume Rs.4,386 crore worth of liabilities and obligations of JSPL which are in the form of intercorporate deposits (ICD) and capital advances given by Jindal Power to JSPL. However, the final outcome was not smooth sailing all along.

The original meeting to seek shareholder approval was set in May-21. However, that meeting was cancelled after proxy advisors strongly objected to the low pay-out. Subsequently, Worldone sweetened its offer and agreed to pay a cash component plus assumption of liabilities of JSPL. However, there are still objections on the arms-length issue since the buyer of JPL, Worldone, is a Jindal group company. 

Notwithstanding the objections, the resolution has got a decisive vote of 97.12% of shareholding and the deal is now likely to be executed. There are some distinct benefits for JSPL from this sale. Firstly, the deal will eliminate Rs.6,566 crore of debt in the books of JSPL attributable to the Jindal power business. Secondly, it allows JSPL to focus on its core steel business, which is seeing strong demand at present. 

Above all, this sale will help JSPL to reduce its carbon footprint, something all metal companies are trying to do. This move also gives JSPL a more favourable positioning in terms of its ESG (Environmental, Social, Governance) metrics and is expected to be valuation accretive.