KEY CORPORATE COMPLIANCE ISSUES IN JSW GROUP

KEY CORPORATE COMPLIANCE ISSUES IN

JSW GROUP

JSW GROUP

The JSW Group, a major Indian conglomerate with interests in steel, energy, and infrastructure, currently faces a multifaceted regulatory and compliance landscape.

As of early 2026, the primary issues center on environmental and human rights scrutiny, mining contract adherence, and cross-border supply chain hurdles.

HUMAN RIGHTS AND INTERNATIONAL SCRUTINY (ODISHA PROJECT)

The most significant reputational and compliance risk currently involves the JSW Utkal Steel Ltd (JUSL) project in Odisha.

UN WARNING (FEBRUARY 2026):	Eight UN officials issued a formal communication warning that the construction of the new steel plant may be violating the rights of indigenous peoples and forest-dwelling communities.
HUMAN RIGHTS DUE DILIGENCE:	The UN officials requested detailed information on JSW’s due diligence processes regarding the rights to food, water, and a clean environment. As of early 2026, reports indicate JSW has faced criticism for a lack of formal response to these specific inquiries.
FINANCING RISK:	International monitoring groups have alerted major global banks (including BNP Paribas and Standard Chartered) that continued financing could lead to non-compliance with the UN Guiding Principles on Business and Human Rights (UNGPs).

 

NON COMPLIANCE ISSUES IN MINING AND DETAILS OF PENALTIES

JSW Steel’s reliance on captive mining has led to recent legal friction with Karnataka state authorities:

PERFORMANCE SECURITY FORFEITURE (FEBRUARY 2026):	The Supreme Court declined to stay a Karnataka government order to forfeit ₹128 crore in performance securities.
Issue:	The forfeiture was triggered by the company's alleged failure to meet the Minimum Guaranteed Production (MGP) quotas at its iron ore mines in Chitradurga. This highlights a critical regulatory risk where operational shortfalls in mining lead to heavy financial penalties and potential "regulatory overhang" on future mining leases

 

₹128 CRORE FORFEITURE

The Supreme Court’s decision on February 18, 2026, to uphold the ₹128 crore forfeiture of JSW Steel’s performance security by the Karnataka government serves as a notable "one-off" financial hit.

While JSW Steel remains highly profitable, this penalty directly affects the bottom line of the current quarter (Q4 FY26). Here is a breakdown of the financial impact based on the latest performance data:

DIRECT EARNINGS IMPACT (BOTTOM LINE)	Net Profit Deduction: The ₹128 crore will likely be accounted for as an "Exceptional Item" or a direct expense in the Q4 FY26 financial results.
PROPORTION TO PROFIT:	In the previous quarter (Q3 FY26), JSW Steel reported a consolidated Net Profit of ₹2,410 crores. A ₹128 crore hit represents roughly 5.3% of a typical quarter’s net profit, indicating a measurable but non-crippling impact on earnings.
EPS DILUTION:	For a company with a massive share base, the impact on Earnings Per Share (EPS) is expected to be minimal (estimated at a few paisa per share), yet it contributes to the broader "regulatory overhang" that investors track.

COMPARISON WITH PAST PENALTIES

To put this in perspective, JSW Steel has navigated similar "regulatory leaks" before:

SEPTEMBER 2024:	Recognized a ₹342 crore provision for surrendering the Jajang mining lease.
SEPTEMBER 2023:	Recognized a ₹389 crore provision for a "Green Cess" in Goa.e

 

ENERGY SECTOR: CONTRACTUAL VS. REGULATORY CAPS

In the energy division, JSW has been navigating the balance between Central Electricity Regulatory Commission (CERC) rules and state agreements:

HYDRO POWER DISPUTE:	A 2025 Supreme Court ruling involving JSW Hydro Energy affirmed that while CERC caps the "free power" a company can pass into consumer tariffs (usually at 13%), the company must still honor higher contractual obligations (e.g., 18%) made to state governments.
FINANCIAL IMPACT:	These "excess" percentages must be borne by JSW and cannot be recovered from consumers, impacting the net profitability of specific power assets.

 

SUPPLY CHAIN AND CROSS-BORDER REGULATIONS

JSW’s foray into the electric vehicle (EV) market via JSW Motors is currently stalled by geopolitical and quality control regulations:

IMPORT LICENSES (2026):	The company has warned of delays in its first car launch due to pending licenses for importing critical components (like safety glass) from China.
QUALITY CONTROL ORDERS (QCO):	Strict Indian quality standards require overseas suppliers to be certified by local authorities. JSW’s heavy dependence on Chinese technology partners for its EV venture (including JSW MG Motor India) remains sensitive to New Delhi’s scrutiny of Chinese investments.

CORPORATE GOVERNANCE AND SEBI COMPLIANCE

Despite the operational challenges, the Group maintains high transparency in its statutory filings:

SEBI DISCLOSURES:	Both JSW Steel and JSW Energy remain compliant with Regulation 30 of the SEBI LODR Regulations, notably in the timely reporting of NCLT approvals for acquisitions (e.g., the Raigarh Champa Rail Infrastructure acquisition in January 2026).
ESG FRAMEWORKS:	The group has shifted toward "Double Materiality" in its 2025-2026 reporting, aligning with the Global Reporting Initiative (GRI) and the Business Responsibility and Sustainability Reporting (BRSR) mandated by SEBI.

 

The above lapses signify how compliance is important for a conglomerate business group like JSW.

R V SECKAR , FCS, LLB, 79047 19295