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Informist, Tuesday, Jan. 14, 2025

By Alina Geogy

MUMBAI – Traders placed bullish bets on the derivatives segment of JSW Energy Ltd. after the company received a letter of intent from the creditors of KSK Mahanadi Power Co. Ltd. to acquire the debt-ridden company. JSW Energy placed an INR 160-billion offer to acquire KSK Mahanadi, outbidding Adani Power Ltd.'s bid by INR 1 billion, sources told Informist on Monday.

Following the development, strong buying momentum took the stock up nearly 6% to INR 547.85 and helped it snap an eight-day losing streak. The bullish sentiment was evident in the derivatives segment too, as traders added long positions to the futures and options contracts of the stock. The January futures contract of JSW Energy closed at INR 550.95, a premium to the spot price. Open interest in this contract rose 2% to nearly 13 million. 

In the options chain, the maximum open interest addition was at the INR 560 and INR 570 strike prices on the call side. These strike prices indicate the likely resistance for the stock till Jan. 30, and are 2-4% higher than the stock's closing price. Short-covering was seen in some call options, indicating improvement in sentiment. On the put side, the highest open interest addition was at the INR 530 strike price. Thus, the stock may find support at INR 530, around 3% lower than the closing price.

JSW Energy's offer to the creditors of KSK Mahanadi comprises a cash payment of INR 105 billion and equity infusion of 26%, which could result in 90% cash recovery by KSK Mahanadi's lenders. With its INR 160-bln offer, JSW Energy also outbid NTPC Ltd., Jindal Power Ltd., and Vedanta Power, among others. KSK Mahanadi Power owns a 3,600 MW coal-powered thermal power plant in Chhattisgarh.

Three operational units of KSK Mahanadi generated earnings before interest, tax, depreciation, and amortisation of INR 24 billion for 2023-24 (Apr-Mar), JM Financial said in a report on Monday. The brokerage expects additional capital expenditure of INR 98 billion for completing the rest of the units. Since JSW Energy paid around INR 160 billion for the acquisition, the transaction is valued at 5.5-6.5 times its enterprise value-EBITDA ratio on full capacity, which could be commissioned in three to four years, JM Financial said, as per its initial estimates.

The next big trigger for the stock will be the company's earnings for the December quarter. JSW Energy's consolidated net profit is expected to grow over 84% on year to INR 4.26 billion in Oct-Dec, while revenue is expected to rise nearly 23% on year to INR 31.21 billion.

Meanwhile, traders added long positions to the January futures contract of the Nifty 50 on Tuesday after the spot index recovered some of the decline from the previous sessions. The benchmark index snapped a four-day losing streak and ended 0.5% higher at 23176.05 points Tuesday. The January futures contract of the Nifty 50 closed at a premium of 103.95 points to the spot index. Open interest in the contract rose 0.3% to 13.91 million, as per provisional data.

--Nifty 50 Jan closed at 23280.00, down 117.90 points

--Nifty 50 Feb closed at 23425.35, down 127.30 points; 249.30-point premium to spot index

--Nifty 50 Mar closed at 23576.00, down 123.20 points; 399.95-point premium to spot index

HCL Technologies, HDFC Bank, Reliance Industries, Infosys, ICICI Bank, State Bank of India, Tata Consultancy Services, Bharti Airtel, Axis Bank, Kotak Mahindra Bank, and Hindustan Unilever were the most actively traded underlying on Tuesday.  End

Edited by Avishek Dutta

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