Why JSW Energy’s equity dilution move at the parent level makes sense
JSW Energy Ltd has decided to raise up to ₹5,000 crore from qualified institutional placement (QIP) of equity in one or more tranches at a floor price of ₹510. Assuming that the entire amount is raised at the floor price, it will lead to about 6% equity dilution. The company had the option of either raising funds in the parent company or in JSW Neo Energy, a wholly owned subsidiary having green energy generation projects.
The equity dilution at the parent level has its own advantages. The holding structure remains simplified and the possibility of holding company discount is eliminated. ₹5,000 crore via QIP; Details here">Also Read: Sajjan Jindal-owned JSW Energy to raise ₹5,000 crore via QIP; Details here In future, the probable listing of the subsidiary would have meant that investors would have directly bought into it leading to reduced appetite and lower valuation for the shares of the parent company.
The market has also cheered the company’s move as the share price rose to touch a 52-week high of ₹604 apiece on 4 April from ₹542 before the announcement on 2 April. Also Read: 11 power stocks including Adani Green Energy, NHPC gained between 20% and 110% in 3 months; check full list Another reason for the equity raising at the parent level could be due to the possible expansion of thermal power capacity. Naturally, this is unlikely to be housed in JSW Neo Energy given its positioning as a green energy vehicle.
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