Valuation of JSW Holding

JSW Energy has filed its DRHP, which is now available on the SEBI website and the same now provides clarity on how much JSW Holdings owns of JSW Energy.The calculations are summarised below:

JSW Holdings (BSE Code 532642, NSE Code JINDALSWHL) holds the stake indirectly through Sun Investments, Vrindavan Services and Gagan Trading.

It holds 32.46 million shares of Sun Investments (representing 43.37% stake). Further, it owns 11.00 million shares of Jindal Coated Steel (representing 50.00% stake), which in turn owns 5.52 million shares of Sun Investments (representing 7.37% stake).

Effective stake held in Sun Investments is as under:
Held directly – 43.37%
Held through Jindal Coated Steel – 5.28% or (0.50*7.37+0. 50*0.4337* 7.37)
Total – 48.65%

Sun Investments holds 108.36 million shares of JSW Energy, which translates into 21.05% stake. It holds further % stake indirectly through Vrindavan Services Pvt. Ltd. (which holds 44.06 million shares or 8.56% stake – 21.71% held by Sun Investments directly and another 5.42% effective stake held through Gagan Trading) and Gagan Trading Company Ltd. (which holds 18.78 million shares or 3.65% stake – 39.4% held by Sun Investments) .
Calculations as under:
21.05+(0.2171+ 0.0542)*8. 56+0.394* 3.65=24.81%
Therefore, JSW Holdings’ effective stake in JSW Energy is determined as under:
48.65*0.2481= 12.07%

The IPO intends to raise Rs40b-50b and considering that 63.23 million shares or 10.94% of the post-issue size is being issued, the company’s post-money valuation works out to between Rs366b-457b. (pre-money valuation of Rs330-412b)

The value of JSW Holdings’ stake in JSW Energy at IPO valuation works out to between Rs.40-50b or between Rs3603-4504 per share.

The valuations of JSW Holdings are summarised below:
Direct investment holdings (listed) of JSW Holdings:
17.83 million shares of JSW Steel @ Rs968 p.s. = Rs17,255 million
6.14 lakh shares of Jindal Steel & Power @ Rs2,326 p.s. = Rs1,429 million
4.61 lakh shares of Jindal Stainless @ Rs150 p.s. = Rs69 million
0.25 lakh shares of Nalwa Sons Investments @ Rs1,745 = Rs44 million
TOTAL Rs18.797 billion

Valuation of JSW Holdings’ 48.65% stake in Sun Investments (excluding investment in JSW Energy – since the same has already been considered separately above)

Direct investment holdings (listed) of Sun Investments:
14.50 million shares of Jindal Steel & Power @ Rs2,326 = Rs33,715 million
3.03 million shares of JSW Steel @ Rs968 = Rs2,934 million
9.30 million shares of Jindal Stainless @Rs150 = Rs1,393 million
0.50 million shares of Nalwa Sons @Rs1745 = Rs881 million
0.63 million shares of Jindal Saw @Rs859 = Rs539 million
0.36 million shares of JSW Holdings @Rs1,915 = Rs700 million
16,500 shares of Shalimar Paints @Rs338 = Rs6 million
TOTAL Rs40.167 billion

Unlisted investment holdings of Sun Investments:
JSW Energy: 5.21 lakh shares of Jindal Equipment Leasing & Consultancy Services (representing 6.74% stake) – listed investments worth Rs20.82 billion
32,350 shares of Nalwa Investments (representing 7.19% stake) – listed investments worth Rs5.42 billion
67.60 lakh shares of Gagan Trading (representing 39.40% stake) – listed investments worth Rs13.03 billion
78.80 lakh shares of Vrindavan Services (representing 21.71% stake) – listed investments worth Rs11.50 billion
Proportionate share of above – (6.74%*20.82) +(7.19%*5. 42)+(39.40% *13.03)+( 21.71%*11. 50) = Rs9.42b

The stakes held in the above four companies indirectly have not been considered for the sake of simplicity. Further, value of 5% stake in Abhinandan Investments, which owns stakes in most of the unlisted investment holding companies has not been considered, for ease of calculation.

Value of stakes, if any, in JSW Aluminium, JSW Cement, JSW Logistics and Infrastructure will be incremental. The DRHP of JSW Energy does not throw any light on the shareholding patterns of these entities, in view of the recent relaxation made in the SEBI DIP guidelines, whereby disclosure of detailed information on all group companies is no longer mandatory.

Summary valuation

Value of direct stakes held – Rs18.8 billion or Rs1,693 per share
Value of JSW Energy stake – Rs40.0 billion or Rs3,603 per share
Value of Sun Investments stake (excluding JSW Energy)
- 48.65% of Rs(40.2+9.4) billion or Rs24.1 billion or Rs2,174 per share
Value of investments in JSW Aluminium, JSW Cement, JSW Logistics and Infrastructure – unknown

Total Valuation Rs7,470 per share.

At current valuations of Rs1,915 per share, JSW Holdings looks fairly attractive, especially considering the further triggers expected in view of other group ventures, elimination of group cross-holdings and possible overseas listing.