Why JSW Energy’s equity dilution move at the parent level makes sense

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Key Points

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..

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 only argument in favour of dilution at JSW Neo Energy would have been that the green energy generation companies are commanding higher valuation versus the fossil fuel-based energy generation companies..

It would have meant raising funds with much lower equity dilution at JSW Neo Energy..

Despite not being a pure green energy company as JSW Neo Energy is just about 50% of the group, JSW Energy is already trading at a similar valuation to that of NHPC, 100% green energy company in terms of EV/MW..

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