Sterling & Wilson Solar ltd management had come out with an IPO offer on 8th August 2019 with a price band between Rs.775-780. IPO was completely OFS of Rs. 31.25 billion with object of the offer was promoter selling shareholders would be utilising net offer IPO proceeds towards funding full repayment of the loans due to Sterling & Wilson Solar and Sterling & Wilson International FZCO (subsidiary) within 90 days of shares listing on stock exchanges. However, as per the new filing with the stock exchanges, promoters of the company (Shapoorji Pallonji and Khurshed Daruvala) have requested the board of directors of the company to extend the repayment date of remaining debt i.e Rs. 25 billion due to liquidity crunch. As of September 2019 shareholding pattern, promoter group of the company hold 77.28% stake in the company out of which 48% has been pledged.
On earnings front, company has reported 52% fall in revenues mainly due to one-off item during same quarter last year (higher revenue recognized from one of the projects). Gross margins increased by 42% due to efficient execution and procurement. Net liabilities as of 30th September 2019 stood at Rs. 28.749 billion which is half of current market cap (Rs. 55 billion). Since listing, share price of Sterling & Wilson solar tumbled by 56%. Change in the repayment terms is a breach of trust for shareholders and a case for the market regulator to step in for not fulfilling the objective or purpose of the prospectus.
Issue opens Tuesday, 6th August 2019
Issue closes: Thursday, 08th August 2019
Listing date: 20th August 2019
Face Value – Rs.1
IPO Price Band – Rs.775-780
The company’s standalone income from operation has witnessed growth of 44% CAGR during Fy17 to Fy19, EBITDA grew at 63% with 10% EBITDA margin. Net profit surged at a CAGR of 72% during the same time frame. Net profit margins for Fy19 stood at 8%. On consolidated basis, return on net worth for Fy19 stood at 63%. Cash balance as of March 2019 is Rs.4208 million.
Management of Sterling and Wilson Solar Ltd:
Mr. Khurshed Daruvala is Chairman of the company and the directorship term would be ending on 01st April 2023.
Objective of the Issue:
To carry out the disinvestment by the Selling Shareholders.
Sterling and Wilson Solar Limited is a global pure-play, end-to-end solar engineering, procurement and construction solutions provider, and were the world’s largest solar EPC solutions provider in 2018 based on annual installations of utility-scale photovoltaic systems of more than 5 mega-watt peak (Mwp) according to IHS Markit.
The company commenced operations in 2011 as the Solar EPC Division of SWPL and demerged from SWPL with effect from April 1, 2017. Over a span of 7 years, they became the largest solar EPC solutions provider in each of India, Africa and the Middle East according to IHS Markit in 2018 and currently have a presence across 26 countries. As of March 31, 2019, they had 205 commissioned and contracted solar power projects with an aggregate capacity of 6,870.12 MWp.
The company offers a complete range of customized solutions for solar power projects. Their customers include leading independent power producers, developers and equity funds. The company adopts a consultative approach to their customers’ solar energy needs and capabilities, which enables them to provide customized solutions to meet their requirements. The company follows a hub-and-spoke business model where they manage the complete supply chain from India, including the design and engineering functions, and engage a few suppliers and third-party subcontractors and procure part of the raw materials for their operations locally in each of their markets, where there is a cost advantage or to comply with local regulations.
The company seeks to leverage this business model to procure products and services solutions for their customers at competitive prices. In Fiscal 2018 and 2019, the revenue from operations outside India accounted for 59.11% and 69.82% of their total revenue from operations, respectively. The company often receives repeat orders from their customers and as of March 31, 2019 customers in India and outside India for whom they have executed more than one project constituted 83.26% and 64.35% of their total commissioned solar capacity, respectively.
Company’s operations are supported by a competent and sizable design and engineering team who are responsible for designing solutions that are innovative and cost-effective, with an aim to increase the performance ratio of solar power projects. The design and engineering team of 154 employees continually seeks to improve the efficiency of their solutions and services.
To tap opportunities in the United States, they adopted a co-development business model to help them secure EPC rights through equity investments in relevant projects. In other markets, such as Australia and Kazakhstan, they have acquired local entities to help them establish a permanent presence in such markets. In addition, as part of their expansion strategy, the company conducts on-the-ground market diligence to evaluate each local opportunity and establish relationships with local suppliers and subcontractors. This helps them identify potential bids in advance and prepare for bids quickly when opportunities arise.