JSW Energy's net debt at the end of three months ended September stood at Rs 24,875 crore, a reduction from the peak levels at the end of fiscal 2024. However, it remains three times higher than the net debt recorded as of Sept. 30, 2023.
The debt level is likely to increase following JSW Energy's recent acquisition of 4.7 GW capacity from O2 Entities, valued at an enterprise value of Rs 12,468 crore. CEO Sharad Mahendra told NDTV Profit that the acquisition will be financed through a combination of internal accruals and debt.
Historical Debt Movement
JSW Energy's net debt has been on the rise for several years now. In the quarter ended March 2023, the power producer saw a huge rise in net debt to Rs 22,200 crore, compared to Rs 9,800 crore a quarter ago. The rise in leverage come on the back of strong capacity addition.
However, it is key to note, that while the company's net debt has risen, net debt to Ebitda (excluding construction work in progress) for the September quarter stood at 2.2x, which is well below the guided range of 3.5x to 4x.
Even if one takes the construction work in progress into consideration, Mahendra states that the industry's average of net debt to Ebitda that rating agencies are comfortably at is 5.5x to 6x, while the level for JSW Energy stands at 4.1x.
JSW Energy's Leverage Set To Rise
Mahendra told NDTV Profit that the O2 Power acquisition will be financed through a combination of internal accruals and debt, with exact numbers being released closer to the deal completion stage.
As per Motilal Oswal, should JSW Energy complete both its acquisition deals with O2 Power and KSK Mahanadi by end of the current fiscal, the company's net debt Ebitda is set to rise to 5.4x versus the current estimate of 4.7x.
Should Investors Be Worried About Rising Debt?
As per Motilal Oswal, the estimated rise in net debt to Ebitda levels should not be a major concern. The brokerage believes that the rise in leverage could be transitory in nature, supported by JSW Energy's strong operating cash flow generation and the ability to raise funds.
Rupesh Sankhe, vice president and power analyst at Elara Securities, seconded the observation. Attractive deal valuations and strong operating cashflow from existing operational assets should keep pressure off JSW Energy's balance sheet post the O2 Power asset acquisition, he told NDTV Profit.
Sankhe also highlighted how JSW Energy's net debt to equity stands at around 0.9x. This gives the company scope to increase debt till the level hits 1.7-1.8x.
JSW Energy CEO Mahendra also told NDTV Profit that the fundraise in April 2024 has left the company with over Rs 5,000 crore free cash as of Q2. He remains confident about the company's strong balance sheet position.
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