JSW Steel: Fitch puts 'BB' on watch positive for FY26

What changed for JSW Steel’s credit story

Fitch Ratings has placed JSW Steel Limited’s (JSWSL) Long-Term Issuer Default Rating (IDR) of ‘BB’ on Rating Watch Positive (RWP). The same action also applies to the ‘BB’ rating on outstanding bonds, including those of its subsidiary Periama Holdings, LLC. The move follows JSW Steel’s board approval to form a 50:50 joint venture (JV) with Japan-based JFE Steel Corporation.

The RWP signals that Fitch sees a credible path to a stronger credit profile, but it is not an upgrade yet. Fitch said it expects to resolve the RWP after the JV is formed, subject to regulatory approvals and other closing conditions. JSW Steel considers this likely by end-FY26.

For equity investors, ratings actions do not directly change earnings. But they can influence borrowing costs, access to capital markets, and the risk perception around a capital-intensive steel expansion cycle.

The proposed JV with JFE and the Bhushan Power assets

Fitch linked the RWP to a proposed JV with JFE Steel to acquire the steel assets of Bhushan Power and Steel Limited (BPSL), which is a JSWSL subsidiary. The JV is expected to be named JSW Kalinga Steel Limited (JKSL). As per Fitch’s note, JKSL will purchase BPSL’s steel assets for ₹244.83 billion by March 2026.

Fitch expects the transaction to result in JSWSL receiving ₹324 billion in cash over the next six months. The agency anticipates that this cash inflow will support a reduction in leverage to levels that are consistent with a higher rating between FY26 and FY28.

The disclosed funding mix includes ₹166.08 billion in debt and equity from JFE. JSWSL also expects JFE’s second tranche of ₹78.75 billion by June 2026, as per Fitch.

What Fitch needs to remove the Rating Watch Positive

Fitch said it expects to resolve the RWP once the JV is formed after receiving regulatory approvals and other closing conditions. It also noted that negative rating action is unlikely while the ratings are on RWP. However, the agency said it would remove the ratings from RWP if the transaction is not executed.

Separately, Fitch highlighted a leverage threshold that would be supportive of positive rating momentum beyond the transaction. It said EBITDA net leverage below 2.7x for a sustained period would be positive for the rating.

This framing matters because it ties the watch outcome to both deal execution and post-deal financial discipline, rather than a one-time balance-sheet event alone.

Fitch’s operating forecasts: margins, leverage, volumes, capex

Fitch forecast JSWSL’s standalone EBITDA margins to rise to ₹9,500 per tonne in FY26 and ₹10,750 per tonne in FY27. The agency attributed this to positive operating leverage, steady prices, lower costs, and supportive government policies.

On leverage, Fitch projected EBITDA net leverage at 2.6x in FY26 and 2.1x in FY27, down from 4.0x in FY25. It also forecast sales volumes to grow by 6% to 10% annually over FY27 to FY28.

Fitch expects capital expenditure to increase to around ₹200 billion to ₹210 billion annually over FY26 to FY28. The agency also noted that JSW Steel’s Indian operations are considered highly efficient, highlighting the Vijayanagar plant’s position in the first quartile of the global crude steel site cost curve. It added that the company plans to expand Dolvi capacity and invest in mining equipment.

Project activity and capacity: Rayalaseema and the current base

JSW Steel described itself as India’s premier integrated steelmaker and cited a capacity of 35.7 MTPA. The company also indicated it has begun work on the Rayalaseema Steel Project in Andhra Pradesh.

Large, multi-year projects can reshape both volumes and cost structures, but they can also increase execution risk and funding needs. That is why ratings agencies typically focus on how expansion is paced alongside leverage, cash flows, and refinancing plans.

Sustainability and decarbonisation: hydrogen and green steel plans

JSW Steel plans to utilise energy from a forthcoming 3,800-tonne hydrogen plant at its Vijayanagar facility. It has an agreement with its affiliate, JSW Energy, to procure green hydrogen and green oxygen for sustainable steel production.

The company also said it expects to earn carbon credits based on the amount of conventional thermal power substituted with green energy. By 2030, it plans to set up a green steel plant to comply with the European Union’s Carbon Border Adjustment Mechanism and gradually reduce the use of blast furnaces throughout its value chain.

These disclosures matter for long-duration investors tracking how Indian steelmakers position themselves for tighter carbon-linked trade and procurement norms.

Other rating and funding references mentioned

Alongside Fitch’s RWP action, the provided material also referenced Moody’s upgrading its outlook on JSW Steel Limited and Periama Holdings LLC to positive from stable in a statement dated Friday, October 3. Moody’s cited meaningful expansion in operating scale and higher earnings from ramp-up of recently completed projects, and it also referred to financial discipline and proactive refinancing of significant debt obligations.

The text also referenced an earlier Fitch outlook revision to positive from negative, including commentary on adding 5 million tonnes per annum of capacity from mid-FY22 and consolidated cash and cash equivalents of ₹13,900 crore as of December 31 (as stated). It further included a Fitch statement dated February 26 affirming the ‘BB’ IDR with a Stable Outlook, with background on acquisitions, capex plans, and mining rights.

Market snapshot and investor contacts in the release

The material included a market datapoint: a share price of 6.4, up 0.52%, as of 03 Jul 2026 at 15:59 PM IST. It also listed investor relations contacts, including Ashwin Bajaj (Group Head - Investor Relations) and retail investor service centre details.

Key numbers at a glance

Why the development matters for investors

The immediate driver of Fitch’s action is the proposed JV structure and the resulting cash inflow expected by the agency. If completed on the described timeline, the transaction could materially change JSW Steel’s leverage profile within FY26 to FY28, which is central to ratings outcomes for steel producers with high capex intensity.

At the same time, the projections include rising capex and continued growth ambitions. That combination makes execution milestones important: the formation of the JV, regulatory and shareholder approvals, and how quickly the cash translates into lower net leverage. Fitch’s explicit reference to sustaining EBITDA net leverage below 2.7x sets a measurable checkpoint that credit markets will likely monitor.

Conclusion

Fitch’s decision to place JSW Steel’s ‘BB’ rating on Rating Watch Positive is tied to a board-approved 50:50 JV with JFE Steel involving BPSL steel assets and an expected ₹324 billion cash receipt. Fitch expects to resolve the watch status once the JV is formed after required approvals and closing conditions, which JSW Steel considers likely by end-FY26. Investors will be watching the JV completion timeline, the cash flow impact on leverage, and the company’s ability to balance expansion capex with credit metrics.