JSW Steel’s Plan to Buy Monnet Ispat Credit Negative: Lucror

JSW Steel’s proposal to acquire Monnet Ispat increases its leverage due to the large debt in the target company, according to Lucror.

No proven track record in acquisition, and increase in event and integration risk are other factors that could adversely impact the credit.

Monnet Ispat has $1.6b debt, while JSW Steel has $6.6b debt, says Trung Nguyen, a senior credit analyst in a note Thursday.

Monnet Ispat’s revenue for financial year in March was just 2.5% of JSW’s.

“Even if the lenders in Monnet Ispat take a large haircut, the deal may still not make economic sense due to the marginal increase in capacity (less than 10%) and revenue,” he says.

Lucror’s credit bias positive for now on continued improvement in JSW’s operations and ramp-up in capacity amid industry recovery and supportive government measures.

NOTE: JSW Steel board approves raising funds via debt, share sale.

Bloomberg News
July 20, 2017, 04:00:34 GMT
Reporting by Divya Patil; Editing by Neha D'silva and Chan Tien Hin