JSW Steel’s new joint venture fast-tracks India entry with ₹4,000 crore thyssenkrupp acquisition | Mint

Mumbai: A joint venture of India’s JSW Steel Ltd and Japan’s JFE Steel will buy German engineering group thyssenkrupp’s specialty steel unit in Nashik and associated technology for ₹4,051 crore.

The 50:50 joint venture between the Indian and Japanese steel majors will acquire thyssenkrupp’s grain-oriented electrical steel (GOES) unit at Nashik in an all-cash deal. The transaction is expected to be completed within eight months, subject to regulatory approvals, JSW Steel said in a notice to the stock exchanges on Friday.

While Avendus Capital advised thyssenkrupp on this transaction, JSW’s internal mergers and acquisition team led the buy-side of the deal. 

thyssenkrupp Electrical Steel India was one of the first makers of electrical steel in India. It reported revenue of ₹1,271 crore for 2023-24. The specialty alloy of iron and silicon is used in electric transformers, generators, and motors due to its high efficiency in converting electricity and mechanical energy.

The Sajjan Jindal-owned JSW and JFE formed their venture, JSW JFE Electrical Steel Pvt. Ltd, in February to make electrical steel in India. The two companies committed to investing ₹5,500 crore to set up a manufacturing unit in Karnataka, which is expected to commence production by FY27.

Now, with this acquisition, the joint venture will get an immediate entry into the electrical steel space.

“The market for GOES 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, thereby also enabling import substitution and hence taking another step towards a self-reliant India,” Jayant Acharya, joint managing director and chief executive of JSW Steel, said in a press statement.

“thyssenkrupp has built a strong technology platform for producing top grade GOES in India, which is expected to play a critical role in India’s green energy transition ambitions,” said Koushik Bhattacharyya, managing director and head, industrials investment banking, Avendus Capital.

“We believe that this asset will grow further under the new ownership and will provide a strong impetus to the government’s push for import substitution. It will not only aid in making India more self-sufficient but will also transform India into one of the few global suppliers of top-grade electrical steel,” he said.

Electrical steel made in India

Apart from small quantities that are manufactured domestically, electrical steel is mostly imported into India. To counter this, the Indian government had included electrical steel as one of the products to be localized through a ₹6,322 crore production-linked Incentive (PLI) scheme for specialty steel.

Electrical steel manufacturers will be given the most benefits under the PLI scheme at 12%. The scheme insists on using basic steel ‘melted and poured’ within India for making electrical steel to ensure end-to-end localization.

Mint reported in February last year that thyssenkrupp, given its significant interests in high-grade electrical steel manufacturing in India, was in talks with the Indian government to expand its production capacity.

“India is probably one of the only countries globally where there is no safeguard protection for electrical steel producers… These are just some of the challenges that we have in the near future to make a really good business case,” Mint quoted thyssenkrupp Electric Steel India managing director Joydeep Bhattacharjee as saying in its February 2023 report.

In October, the Wall Street Journal reported that thyssenkrupp has been trying to turn around the fortunes of its steel business and making its operations more sustainable.

JSW Steel ended Friday 1.25% higher on BSE at ₹992.4 per share. Sensex closed 0.27% higher. The announcement was made after market hours.