Impact of overturned JSW and Bhushan Steel resolution plan

Implications of recent SC order on liquidation of Bhushan Power & Steel Limited (BPSL)

Recently SC declared JSW Steel’s Rs 19,700 crore resolution plan for BPSL “illegal” and ordered the company’s liquidation due to many reasons, viz., Violation of IBC Section 30(2) – Use of OCDs instead of equity, Delay in implementation, Misrepresentation of facts by JSW Steel, Failure of CoC, and resolution professional.

JSW Steel had acquired a 49% stake in BPSL in 2021 through the IBC process, gaining access to a 2.75 MTPA steel manufacturing facility in Odisha. By October 2021, the company had increased its stake to 83%.

Key violations

1. The acquisition was executed through a mix of equity and optionally convertible debentures, despite the court’s earlier position that such takeovers must be conducted solely through equity to keep the process transparent.
2. The resolution plan was not implemented within the mandated timeline.

On JSW Steel Limited

1. JSW Steel shares fell 5.46% to ₹972.15 on BSE; the market cap dropped to ₹2.37 lakh crore post the order of the liquidation.
2. Loss of 2.75 mtpa capacity in Odisha’s manufacturing facility; This accounted for 12.5% of JSW Steel’s total capacity: jeopardizes plan to expand to 5 mtpa by FY27.
3. There will be of Rs 4,000–4,500 crore shortfall in FY25 (13% of JSW capacity, 10–11% EBITDA loss).
4. Potential lower recoveries than 41.03% offered under JSW plan; PSU banks like SBI & PNB affected.
5. BPSL contributed approximately ₹21,800 crore in revenue and ₹671 crore in profit for FY24. Its liquidation could result in a revenue loss of around ₹22,000 crore for JSW Steel.
6. JSW had planned to expand this to 5 MTPA via Phase II. The ₹4,488 crore capex earmarked for this is now at risk. Some expansion-related facilities have already been commissioned.
7. A likely write-down of nearly 25,000 crores (investment + capex already incurred).
8. Reversal of tax benefits amounting to approximately ₹7,000 crore that were availed during the BPSL acquisition.
9. Despite financial creditors agreeing to refund JSW Steel if the Supreme Court invalidates the resolution plan or denies immunity concerning money-laundering cases involving previous promoters, analysts believe JSW Steel could still incur substantial losses.
10. Need to see how the impact will unfold on rights over earnings and cash outflow on this asset for the past four years, on opportunity cost for JSW on acquisition value, and on legal recourse available with JSW. But as of now, even with the refund, it looks like a loss of about INR 15,000 crore for the company."

 

On Banks

1. SW Steel had also availed a loan of ₹10,800 crore from State Bank of India (₹7,300 crore) and Bank of Baroda (₹3,500 crore) to acquire BPSL.
2. BPSL itself also has total secured loans of around ₹4,000 crore.
3. With the resolution now overturned, these recoveries are at risk of being legally questioned or reversed during liquidation. If JSW Steel’s investment is deemed invalid, banks could be forced to reclassify the exposure as non-performing again, potentially triggering fresh provisions or write-downs.

On IBC law

1. Such reversals can deter potential investors and resolution applicants who may fear that their investments could be undone due to procedural lapses, even years after implementation.
2. Importance of adhering to the 330-day timeline for insolvency resolution processes, including time spent in litigation. This strict interpretation could lead to more companies being pushed into liquidation if resolutions are not completed within the stipulated timeframe, potentially resulting in value erosion and job losses.
3. The unpredictability introduced by this ruling may lead to a decline in investor confidence, particularly among foreign investors. Several international funds have reportedly reconsidered or paused their investment plans in Indian distressed assets, citing concerns over legal certainty and the enforceability of resolution plans.
4. Raises a serious question on the IBC law and its rules, finality of the judgements.

Conclusion

The Supreme Court's decision to liquidate BPSL has significant ramifications for JSW Steel, the banking sector, and the broader insolvency framework in India. It underscores the need for strict adherence to legal provisions and timelines under the IBC while highlighting the potential risks of procedural lapses. The ruling may prompt a reevaluation of the IBC's implementation and could lead to legislative or regulatory reforms to restore investor confidence and ensure the efficacy of the insolvency resolution process.

Green Banks - A much needed push for suastinability

In the wake of increased Global-warming and environmental crises there is need of the hour and investments required in establishing financial institutions which will fund the environmental conservation, preservation and help in optimal utilization of resources.

So, fulfill this all around the world we can see increasing mobilization of resources.

What is Green Banks: The OECD (2016) defines a green investment bank as “a publicly capitalized entity established specifically to facilitate and attract private investment into domestic LCR [low-carbon and resilient] infrastructure and other green sectors such as water and waste management through different activities and interventions.”

Capitalisation sources of these banks: As of now these banks are funded by 70% from Government and 19% from Private capital.

Goals of Green Banks:

1.      Mobilize Private Capital

2.      Support Clean Energy

3.      Drive Down Costs

4.      Climate Impact

5.      Equity and Access

Focus areas of Green Banks

Green banks focus on accelerating the transition to a low-carbon economy by targeting sectors where clean technologies are commercially viable but underfunded due to market barriers. These includes,

1.      Renewable Energy

2.      Energy Efficiency

3.      Clean Transportation

4.      Green Buildings and Housing

5.      Climate Resilience and Adaptation

6.      Water and Waste Management

 

Which are the major Banks:

1.    United States: The New York Green Bank has mobilized over $1 billion in clean energy investments. The U.S. Environmental Protection Agency awarded $20 billion in green bank grants to support clean energy projects nationwide.

2.  Australia: The Clean Energy Finance Corporation (CEFC) has utilized over a third of a $1 billion Household Energy Upgrades Fund to provide green loans for energy-efficient home upgrades.

3.      United Kingdom: The UK Green Investment Bank, established in 2012, has played a significant role in financing renewable energy projects.

 

Green Banking in India

India is exploring the establishment of a dedicated national green bank to bridge the financing gap in the renewable energy sector. The NITI Aayog is examining possible structures for such an institution, considering models like the National Bank for Financing Infrastructure and Development.

All Green Banks have the mission to address climate change, though many also have additional objectives such as improving resiliency or serving low-income communities.

Green Banks make it easier to finance projects in new markets, geographies and technologies that otherwise couldn’t be built. This mean cheaper and cleaner energy for customers and more investment for private capital providers.

The world’s first green bank is widely recognized as the Connecticut Green Bank, established in 2011 in the United States.

There is a need for rapid expansion and establishment of new Green Banks across the world to finance the green initiatives, what you say?

For further reading:

What is a Green Bank - Coalition for Green Capital

Green Banks | US EPA

 

M&M acquires SML Isuzu

 Mergers & Acquisition in CV space: Mahindra to acquire 58.96% in SML Isuzu

Earlier in March 2025 there was a buzz that Ashok Leyland will acquire SML Isuzu but the company outrightly declined this report.

Now M&M announced acquisition of SML Isuzu at a price of Rs. 650 per share amounting to Rs. 555 crores.

The market price of the company stood at Rs. 1,773 per share on 25^th April 2025, seems like M&M got a deal at the good price.

The company holds a 16% market share in the Intermediate Light Commercial Vehicle (ILCV) bus segment. SML has a strong legacy, a loyal customer base and a great product portfolio which will help Mahindra to achieve its goal of increasing its market share in this segment to 6% by FY31 and over 20% by FY36.

Mahindra & Mahindra has a strong 52% market presence in the light commercial vehicles segment by this strategic acquisition not only increase market share in CV space but also improve its operating efficiency by consolidating platforms, unifying supplier and dealer networks, and optimising manufacturing capacity.

It will help M&M in to double its market share in the commercial vehicle segment and drive growth in its Trucks and Buses Division, positioning itself as a key player in the expanding Indian CV market.

Following this M&M will make a mandatory open offer to acquire up to 26% stake from public shareholders of SML in accordance with SEBI regulations.

This strategic acquisition will make M&M one of a dominate player.

 

What is Mandatory Open Offer Under SEBI SAST Regulations:

When a company undergoes a significant change in ownership, minority shareholders often face uncertainty (SEBI SAST Regulations) are designed to protect them by mandating an Open Offer in certain scenarios.

An open offer is triggered under the following conditions:

1. Acquisition of 25% or more voting rights (Regulation 3(1)).
2. Creeping acquisition beyond 5% in a financial year when holding is between 25%-75% (Regulation 3(2)).
3. Indirect acquisition of control of the company (Regulation 4).