JSW Energy has announced it will no longer pursue the electric vehicle (EV) venture. The firm attributed it to ‘higher than anticipated uncertainties associated with the EV business’, while saying that it would rather ‘maintain capital cushion for growth opportunities in power and other related businesses’. JSWE had earlier envisaged an investment of ~`6,500 crore for EVs (~30% if its capital employed in FY18). It had spent ~`2.5 crore in setting up a team to evaluate the EV business.
After a bold diversification announcement and the promoter publicly expressing his desire for an automotive business (link), such a turn of events is testament to the fact that the promoters/management will not pursue opportunities where they believe the returns/risks are not balanced. It reinforces confidence on the firm’s prudent capital allocation approach. Now, with a clear focus for growth in the power sector, we believe that JSWE is the best play on the consolidation theme in the sector.
