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Last Updated : Aug 06, 2019 05:15 PM IST | Source:

Sterling and Wilson Solar IPO to open on Aug 6; 10 things you should know

The shareholding of promoters Shapoorji Pallonji and Company Pvt Ltd and Khurshed Yazdi Daruvala will be reduced to 49.11 per cent and 25.01 per cent from 65.77 per cent and 33.33 per cent respectively, post issue.

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Sterling and Wilson Solar (SWSL), the solar engineering and construction arm of the Shapoorji Pallonji Group, will launch its initial public offering for subscription on August 6.

The issue, which has a price band of Rs 775-780 per share, will close on August 8.

The book running lead managers to the issue are ICICI Securities, Axis Capital, Credit Suisse Securities (India), Deutsche Equities India, IIFL Securities and SBI Capital Markets, IndusInd Bank and YES Securities (India).


Here are 10 key things you should know before subscribing to the issue:

Company Profile

SWSL is a global pure-play, end-to-end solar engineering, procurement and construction (EPC) solutions provider. It was the world's largest solar EPC solutions provider in 2018 based on annual installations of utility-scale photovoltaic (PV) systems of more than five mega-watt peak (MWp) with a market share of 4.6 per cent for the year, according to IHS Markit. It was also the largest solar EPC solutions providers in 2018 in India, Africa and Middle East, with respective market shares of 16.6 per cent, 36.6 per cent and 40.4 per cent.

SWSL provides EPC services, primarily for utility-scale solar power projects with a focus on project design and engineering, and manages all aspects of project execution from conceptualising to commissioning, and has a presence in 26 countries. It also provides operations and maintenance (O&M) services, for its own as well as third-party projects. SWSL was demerged from Sterling & Wilson Private Limited (SWPL) on April 1, 2017.

As of March 31, 2019, the company had 205 commissioned and contracted solar power projects, with an aggregate capacity of 6,870.12 MWp. Its order book was to the tune of Rs 3,831.58 crore as of the same date.

SWSL operates an asset-light business model, under which customers are responsible for sourcing and acquiring real estate while SWSL typically leases equipment required for operations. This business model generally entails low capital expenditure and fixed costs, and offers flexibility and scalability to meet customer needs, provide customised solutions and respond quickly to market conditions.

It is able to operate with low working capital as its EPC contracts are typically of short duration and require advance payment from customers for certain deliverables. The EPC contracts include shorter payment cycles from customers while payment cycles from suppliers are longer.

Public Issue Details

The issue comprises of an offer for sale by the promoters Shapoorji Pallonji and Company Private Limited aggregating up to Rs 2,083.33 crore and Khurshed Yazdi Daruvala totalling Rs 1,041.67 crore.

The minimum bid lot is 19 equity shares and in multiples of 19 equity shares thereafter.

Money to be Raised

SWSL is targeting Rs 3,125 crore through the IPO.

Objects of the Offer

The company will not directly receive any proceeds from the offer, and all the offer proceeds will be received by the stake selling shareholders.

The promoters will utilise a portion of the net offer proceeds, towards funding full repayment of the loans due to the company, and Sterling and Wilson International Solar FZCO, from SWPL and Sterling and Wilson International FZE (a subsidiary of SWPL) respectively within 90 days of the date of listing of the equity shares.

Competitive strengths

> SWSL is the largest global solar EPC solutions provider in a fast growing solar industry.

> It is the comprehensive end-to-end EPC solutions provider with a global execution track record.

> It has strong relationships with customers and other key stakeholders.

> It has strong parentage and ability to globally leverage the Shapoorji Pallonji 'SP' brand.

> It has strong growth and financial performance backed by an asset-light business model.

> It has experienced key management personnel, project management and operations team


The company aims to

> Maintain market leadership through strategic expansion of overseas operations.

> Grow customer base and maintain relationships with other key stakeholders.

> Focus on increasing operational and financial efficiency.

> Focus on expanding O&M, rooftop solar EPC and solar storage solutions


Company's profit in FY19 increased by 41.66 per cent year-on-year to Rs 638 crore. Revenue grew by 19.9 per cent to Rs 8,240 crore as compared to FY18.

Revenue from operations outside India accounted for 59.11 per cent and 69.82 per cent of total revenue from operations, respectively, in fiscal years 2018 and 19.

Its cash & equivalents stood at Rs 455 crore and debt to equity at 2.6x (against 0.9x in FY18). Short-term borrowings increased significantly to Rs 2,228 crore in FY19, from Rs 184 crore last year) due to demerger, higher buyer's credit and loans (working capital).


Promoters, shareholding and management

The shareholding of promoters Shapoorji Pallonji and Company Pvt Ltd and Khurshed Yazdi Daruvala will be reduced to 49.11 per cent and 25.01 per cent from 65.77 per cent and 33.33 per cent respectively, after the issue.

Khurshed Yazdi Daruvala is chairman and non-executive non-independent director of the company. He has been part of the Sterling and Wilson group for about 25 years and held the position of managing director of SWPL.

Pallon Shapoorji Mistry is a non-executive non-independent director of the company. He is on the board of companies such as Shapoorji Pallonji and Company Private Limited, Afcons Infrastructure Limited, Shapoorji Pallonji Infrastructure Capital Company Private Limited, Shapoorji Pallonji Oil and Gas Private Limited and Sterling and Wilson Private Limited.

Bikesh Ogra is a non-executive non-independent director of the company, and its global CEO. He joined the Sterling and Wilson group in 1996 and has over 22 years of experience in the EPC sector.



SWSL commenced operations in 2011 as the solar EPC division of Sterling and Wilson Pvt Ltd (SWPL), which has been demerged with effect from April 1, 2017. SWSL, along with its subsidiary Sterling and Wilson International Solar FZCO (SW FZCO), entered into brand sharing agreements that allow SW FZCO and the company to use certain intellectual property belonging to the Shapoorji Pallonji group (SP Group) and to continue to benefit from the financial support of the SP Group and its track record of project execution, in bidding for large scale projects.

SWSL has also entered into a framework agreement on October 11, 2018 with SWPL, pursuant to which SWPL will execute all service contracts entered into prior to the demerger from its branch offices, while transferring all related benefits to the former.

SWPL has also agreed to provide certain shared services that would be required to operate the business, including human resources, information technology, common management and tax services. The company has the right to use Sterling and Wilson (S&W) group's brand and logos without payment and have a right of first refusal to provide EPC solutions for the solar component of any hybrid projects executed by SWPL under the Framework Agreement.

The intention of the demerger was to make SWSL's balance sheet strong enough to bid for solar projects independently, thereby reducing dependence on the SP Group, and taking advantage of the future growth opportunities in the solar industry.


Here are some risks highlighted by brokerage houses:

> Slowdown in global economic expansion leading to subdued demand of solar EPC services

> Inability to maintain profitability margins

> Increased competition may result in poor performance in winning tender bids

> Revenue concentration among top 10 customers

> Poor expansion of high margin operation and maintenance business

> Delay in project completion and advance receipts from customers

> Slower than expected ramp-up of solar power demand

> 35.76 per cent of SWSL's shares held by SPCPL shall be pledged in favour of HDFC Ltd pursuant to a financing facility that was availed by the promoter.

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First Published on Aug 5, 2019 05:16 pm
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