SBI does a Rs 100 crore private equity into JSW Cement. Why?

As per the media reports, State Bank of India (SBI) is investing Rs 100 crore into JSW Cement for a minority stake.

Key points to note –

  • Investment is through Compulsory Convertible Preference Share (CCPS) and the valuation linked to the Company’s future performance would be determined at the time of proposed IPO of the business.
  • This capital infusion by SBI is supposed to be supporting JSW Cement’s capacity expansion from current 14 MTPA to 25 MTPA.

I am personally confused about the announced transaction. I just can not figure out the rationale. Note the following –

  • Amount of investment is insignificant – Rs 100 crore – SBI is a Rs 50 lakh crore Balance Sheet size entity. JSW group is worth lakhs of crores. What exactly would Rs 100 crore do?
  • Reason for investment – What is SBI or JSW Group trying to achieve from the said transaction? Neither SBI is a strategic investor nor it fits into it’s core focus areas.

The disclosed information doesn’t help in getting any clarity on the above.

Given the amounts involved, it really doesn’t count as an important information. However, given the confusions, I thought it’s worth keeping it as records and also checkout if anyone has any more information.

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