JSW lost out on Holcim but made another strong strategic bet

Instead, the steel-to-sports conglomerate was busy stitching together an equally significant acquisition in an entirely different field – renewable energy. The group inked a deal with Mytrah Energy India, which values the renewables producer’s portfolio of 2.3 gigawatts (GW) of renewable energy capacity at around $2 billion. Mytrah has one of the biggest wind portfolios in the country, with a capacity of around 1.7GW, in addition to 535MW of solar power.

The buy, if it goes through, will speed up JSW Energy’s plans to switch the bulk of its power portfolio to renewables. The group plans to have 55% of its energy portfolio in renewables within the next two years and is targeting a renewables capacity of 20GW by the end of the current decade.

As conglomerates grow, at consolidated revenues of around $13 billion, the JSW Group is just a tenth of India’s two biggest conglomerates – the Reliance and Tata groups. But what sets the JSW diversifications apart is the core focus it has retained on the core sector. Of course, there is a side foray into franchise sports – it owns IPL biggie Delhi Capitals, Bengaluru FC and a pro kabaddi team – but that’s just by the way.

JSW is putting the big bucks on the long-term India growth story. India’s push towards a$5 trillion economy and beyond is going to be driven by infrastructure. And that’s where the steelmaker has focused its diversifications – from steel to cement to power to captive coal and lignite mines to port infrastructure, it has essentially honed in on India’s notoriously difficult to operate core infrastructure sector.

In a recent interview, Gautam Adani justified his Holcim buy by arguing that an economy the size of India simply cannot grow by importing cement – it is one of the commodities that large countries have to be more or less self-reliant in. The same goes for steel or cement or energy – all sectors where the JSW Group has focused its energies and investments in.

These are also notably emissions-heavy sectors. While the carbon footprint of companies has never deterred Indian investors or lenders from backing projects, the same is definitely not true for overseas investors and lenders.

It is clear that going forward, the Sajjan Jindal conglomerate is eying global sources for raising the massive funds needed to back its core infra push. With the rapid build-up of its renewables portfolio – it had already acquired Jayprakash Power’s hydro-power assets and is developing the 240MW Kutehr hydro-power project – JSW now is hoping to add Mytrah Energy to this green mix.

This is clearly part of the larger plan to green its carbon footprint and make itself a more attractive proposition for climate-sensitive investors. While JSW Energy is aiming for a 50% cut in its carbon footprint by 2030 and wants to become carbon neutral by 2050.

A lot of this is driven by the need to secure more long-term funding for its infrastructure expansion plans from overseas, as domestic long-term financing for infrastructure is severely hampered by the rising NPA burden on lenders, particularly from infra loans turned sour.

JSW has been one of the early movers among Indian conglomerates in switching to green and sustainability-linked bonds. The group has raised about $1.6 billion via SLBs and green bonds. Last year, flagship JSW Steel raised $500 million via sustainability-linked bonds, linked to its ability to cut emissions from its steel business by about 23% by the end of the decade. Failure to meet the target will entail a 0.375% increase in the coupon rate. In fact, Group CFO Seshagiri Rao said, in a recent interview with Mint, that the group intends to switch entirely to financing through green bonds within the next five years, as this will have the double benefit of both lowering the cost of borrowing and doubling the tenure to 10 years.

For the JSW Group, going green is clearly as much about greenbacks as it is about greening the planet.