The Supreme Court’s Stay on JSW-Bhushan Deal: A Green Light for Strategic Stressed Asset Plays?

The Supreme Court’s May 26, 2025, order to temporarily halt the liquidation of Bhushan Power & Steel Ltd (BPSL) has reignited discussions around India’s insolvency framework and created a pivotal moment for investors in stressed infrastructure assets. While the court’s May 2 ruling had voided JSW Steel’s ₹19,300 crore ($2.3 billion) acquisition of BPSL due to procedural lapses under the Insolvency and Bankruptcy Code (IBC), the stay on liquidation now presents a critical opportunity to reassess the valuation and strategic potential of undervalued assets in sectors like steel, power, and infrastructure.

The Ruling’s Strategic Implications
The court’s pause on BPSL’s liquidation signals a nuanced shift in how procedural compliance and operational outcomes are balanced under the IBC. While the May 2 decision emphasized strict adherence to timelines and documentation (e.g., Form H compliance), the stay acknowledges the broader economic consequences of abruptly unwinding a deal that had already revived a moribund asset. BPSL, once a poster child for India’s “dirty dozen” non-performing assets (NPAs), had been brought back to profitability under JSW’s management, contributing ₹14,091 crore to JSW’s balance sheet by March 2024. This case underscores a critical lesson: substantive progress in reviving stressed assets can outweigh technical procedural flaws in the eyes of courts—provided stakeholders act swiftly to secure legal remedies.

For investors, this creates two compelling opportunities:
1. Revisiting Struck-Down Deals: The BPSL case may set a precedent for other resolution plans that faced procedural hurdles but delivered tangible value. The Supreme Court’s willingness to grant a stay suggests that stakeholders with operational achievements (e.g., debt repayment, asset turnaround) could negotiate similar stays or legal appeals.
2. Discounted Valuations in Stressed Sectors: The uncertainty around BPSL has likely depressed valuations of other stressed assets in infrastructure-heavy sectors like power, construction, and utilities. Strategic investors can now identify undervalued assets with clear operational upside but unresolved legal/regulatory issues.

JSW Steel’s shares surged 2.2% on May 26, reflecting investor optimism about the stay’s impact. However, the stock’s broader trajectory—down ~15% since late 2023—hints at lingering market skepticism about its ability to navigate IBC complexities. This volatility creates a buying opportunity for investors willing to bet on a favorable review petition outcome.

Key Sectors for Strategic Plays
The BPSL case is a microcosm of India’s stressed asset landscape. Consider these sectors ripe for strategic investment post-ruling:
- Steel and Heavy Industry: With JSW’s BPSL stake valued at ₹14,091 crore, similar under-leveraged assets in steel (e.g., Bhushan Steel, Essar Steel) could offer scale and synergies.
- Power and Renewable Energy: Stressed thermal power plants with environmental clearances or grid connectivity can be revived cost-effectively, especially with renewable integration mandates.
- Infrastructure and Construction: Assets tied to stalled projects (e.g., highways, ports) with government guarantees or PPP frameworks could see turnaround opportunities.

Risk Mitigation Strategies
While the BPSL case highlights upside, investors must mitigate risks:
- Legal Due Diligence: Partner with law firms specializing in IBC to identify procedural gaps and potential legal defenses for stressed assets.
- Government Engagement: Monitor policy changes to the IBC, such as proposed timelines for resolution or asset-specific incentives (e.g., tax breaks for greenfield projects).
- Creditors’ Collaboration: Engage with creditor committees (like BPSL’s CoC) early to negotiate terms favorable to both debt repayment and operational continuity.

The Nifty Infrastructure Index has underperformed the broader Nifty 50 by ~20% over five years, reflecting sector-specific challenges. However, a favorable resolution in BPSL could spark a sector-wide re-rating, particularly in companies with stressed but operational assets.

Conclusion: Act Now—Before the Window Closes
The Supreme Court’s stay on BPSL’s liquidation is a clarion call for investors to pivot toward stressed infrastructure assets. The ruling’s emphasis on operational substance over procedural perfection opens a tactical window to acquire undervalued assets with clear turnaround potential.

For aggressive investors, the playbook is clear:
1. Target Assets with Partial Turnaround: Focus on firms like BPSL that have revived operations but face legal hurdles.
2. Leverage the IBC’s Flexibility: Use the 60-day stay framework to negotiate stays and refinancing terms for similarly situated assets.
3. Monitor the Review Petition: A favorable outcome in JSW’s review plea could validate the “substance over form” approach, catalyzing a wave of similar deals.

The BPSL case is not an end—it’s a starting point. Investors who act swiftly to capitalize on this shift in judicial thinking can secure stakes in undervalued infrastructure assets before the market catches up. The clock is ticking—don’t miss the next big opportunity in India’s stressed asset arena.