JSW Energy's Largest Acquisition To Unlock Nearly Rs 10,000-Crore In Value, Says Motilal Oswal

The acquisition of various companies in the energy management and clean energy systems space for Rs 12,468 crore by JSW Energy Ltd. is set to unlock nearly Rs 10,000 crore in value, according to Motilal Oswal.

The JSW Energy share price reacted positively to the brokerage reports and the stock opened over 4% in the green on Monday morning.

JSW Neo Energy, a subsidiary of JSW Energy, signed definitive agreements to acquire 100% interest in O2 Power Midco Holdings Pte. and O2 Energy SG Pte., as well as their subsidiaries. All of the target companies have a consolidated operational and under construction/development renewable energy portfolio of 4.7 GW in India.

According to the company, the acquisition “will leapfrog” its locked-in generation capacity by 23% — from 20,012 megawatts to 24,708 MW.

Motilal Oswal views this move "positively" and expects up to Rs 57 per share value unlocking upon deal completion. With a total of 174 crore equity shares available, the total value addition will add up to about Rs 9,962 crore.

The brokerage maintained a 'buy' on JSW Energy with a target price of Rs 810 target, implying a potential upside of 29% from the previous close.

Motilal Oswal values the core business at 15 times fiscal 2027 Ebitda, reflecting its "strong operational performance and market position." The stake in JSW Steel is valued at a 25% discount to the current market price, it said.

O2 Power has full transmission connectivity and the entire under-construction pipeline is backed by Power Purchase Agreements, the brokerage said. "We believe this is crucial in providing confidence to the market about the timely execution of the project pipeline."

Potential rise in leverage is not a major concern given the strong operating cash flow, Motilal Oswal said.

According to Pritesh Vinay, director of finance and chief financial officer of JSW Energy, “the acquisition of O2 Power's renewable energy platform is significantly value accretive to the shareholders of JSW Energy.”

The company said that it expects to complete the proposed acquisition by May 26, 2025. However, the filing added that the transaction is subject to receipt of the necessary regulatory and other customary approvals.

Seven out of the 12 analysts tracking the company have a 'buy' rating on the stock, three suggest a 'hold' and two have a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 5%.