A JSW Steel group entity is planning to raise Rs 26 billion through a three-year zero-coupon bond to fund its Rs 39-billion acquisition of Thyssenkrupp Electrical Steel India from Germany’s Thyssenkrupp Group. The financing for the deal will include Rs 26 billion in debt and Rs 13 billion in equity.

The bond, set to be raised on January 24, carries an implied yield of 9.45 per cent. This fundraising is being carried out by Jsquare Electrical Steel Nashik (JESPL), a subsidiary of JSW JFE Electrical Steel, which was established in September 2024. JSW JFE Electrical Steel is a joint venture between JSW Steel and Japan’s JFE Steel, the latter being Japan’s second-largest steelmaker.

As part of the arrangement, both partners will contribute Rs 13 billion in equity to Jsquare and provide a board-approved letter of comfort to ensure that the company can meet its financial commitments related to the bond issuance, according to the bond’s terms.

Jsquare, currently without its own operations, was set up just four months ago. Following the acquisition, the joint venture plans to rebrand Thyssenkrupp Electrical Steel India to reflect the JSW and JFE brands.

The transaction will grant JSW Steel (JSWSL) an exclusive license from Thyssenkrupp to manufacture cold rolled grain oriented (CRGO) electrical steel in India, a capability limited to a select few steel producers globally. Additionally, Jsquare is expected to benefit from managerial, financial, and operational support from both JV partners, according to Care Ratings, which assigned an AA- Stable rating to the proposed non-convertible debentures (NCDs).

JSW Steel currently has a production capacity of 35.7 million tonnes per annum (MTPA), including 1.5 MTPA in the United States, while JFE Steel is a globally renowned steel manufacturer with a long-standing collaboration with JSW Steel.