Sterling and Wilson Solar Limited IPO

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(i) The Company is in the business of electromagnetic contracting for the last 3 generations as a ShapoorJi and Pallonji Group. However, in 2011 they saw a big opportunity in Solar business and they entered into it. They commenced operations in 2011 as the Solar EPC Division of SWPL and demerged from SWPL with effect from April 1, 2017, so that Solar as a separate business gets more value.

Over a span of seven 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.

(ii) They provide end-to-end solar engineering, procurement, and construction (“EPC”) solutions provider, and were the world’s largest solar EPC solutions provider in 2018 based on annual installations of utility-scale photovoltaic (“PV”) systems of more than five-megawatt peak (“MWp”), according to IHS Markit.

(iii) They provide EPC services primarily for utility-scale solar power projects with a focus on project design and engineering and manage all aspects of project execution from conceptualizing to commissioning. They also provide operations and maintenance (“O&M”) services, including for projects constructed by third-parties.

(iv)  As of March 31, 2019, they had 205 commissioned and contracted solar power projects with an aggregate capacity of 6,870.12 MWp.

The order book, which they define as the value of solar power projects for which they have entered into definitive EPC contracts minus the revenue already recognized from those projects, was 3831 Cr as of March 31, 2019.

In Fiscals 2018 and 2019, their Revenue from operations outside India accounted for 59.11% and 69.82% of the total revenue from operations, respectively

Interaction with Management 

Sterling and Wilson Solar Limited IPO Stock Quote & Charts

260.80

+4.99%

  • Open: 253.15
  • High - Low: 260.80 - 251.75
  • Previous Close: 248.40
  • Total Traded Volume: 11982
  • Updated On: 05-Dec-2019

Objects of the Sterling and Wilson Solar Limited IPO:

It is a pure OFS vide which promoters Shapoorji Pallonji and Khurshed Yazid Daruvala are selling shares worth of 4500 Cr. The company will not directly receive any Net Proceeds from the Offer and will accordingly not have direct access to such funds. However, the Promoter Selling Shareholders shall utilize a portion of the Net Offer Proceeds to fund complete repayment of 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 listing of the EquityShares.

Sterling and Wilson Solar Limited IPO Details:

Open Date: Aug 06 2019
Close Date: Aug 08 2019
Face Value: ₹ 1 Per Equity Share
Issue Type: Book Building
Lot Size: 19 Shares
Issue Price: ₹ 775-780 Per Equity Share
Listing At: NSE,BSE
Listing Date: Aug 20 2019

Promoters And Management:

1. Shapoorji Pallonji and Company Private Limited (“SPCPL”)- SPCPL was incorporated on January 23, 1943, as a private limited company under the Companies Act, 1913. SPCPL is primarily engaged in the business of construction, execution, improvement, development, administration, tender or acquisition of contracts and concessions for construction in major business areas namely, EPC, infrastructure, water, energy, and real estate. There have been no changes to the primary business activities undertaken by SPCPL. 2. Khurshed Yazdi Daruvala, aged 50 years, is one of our Promoters and the Chairman and a Non-Executive and Non-Independent Director of our Company.

Financials of Sterling and Wilson Solar Limited IPO:

Particulars(cr) FY16 FY17 FY18 FY19
Revenue 2739 1640 6872 8240
EBITDA 196 65 550 852
EBITDA Margins 7.10% 3.90% 8.00% 10.30%
PAT 125 31 450 638
Equity - - 16.036 16.036
Debt 0.307 315 184 2227
Net-Worth - - 193.8 841
IZ Review 1. The Company has shown excellent growth in the Revenue. The CAGR growth of last 4 years is 44.36% 2. The PAT growth is even superior. The CAGR growth is 72.18% in the last 4 years. 3. The EPS for FY18-19 stands at 40. So accordingly the P/E post issue would be 20.  The EV/EBITDA Stands at 22x. 4. The total debt as on 31.03.2019 stands at 2227 Cr and Net-worth at 841 Cr. So D/E as on 31.03.2019 is 2.64. However, as per manangement the company has given loan to some of the group companies which will be given back to company after getting money from the IPO. As on 31.03.2019, total loan outstanding to other companies stand at 1933 Cr. So once they get this money they will become debt free.

Comparison With Peers:

As per DRHP there is no peer in the market which is in the same business with the company.

Recommendation on Sterling and Wilson Solar Limited IPO:

Review and Recommendation of InvestorZone is:  3/10 1. The solar business is very tricky. Despite a lot of potential as green energy, it has not shaped up well over the years as anticipated by many in the industry. 2. They operate in a highly competitive market where bidding is the way to get EPC business. 3. Up to 35.76% of the Equity Shares are pledged by the promoters. 4. The Issue looks fully priced in at P/E of 20x and EV/EBITDA of 22x. The present market condition is also very bad. So will wait for the company to become debt free after 90 days of the IPO and then we may think of investment.

Registrar of Sterling and Wilson Solar Limited IPO:

  1. Link Intime India Private Limited

Bid Details of Sterling and Wilson Solar Limited IPO as on
08-Aug-2019 17:00:00 IST

No.of shares offered No. of shares bid No. of total times
12,096,774 12,332,273 1.02
6,048,386 5,406,697 0.89
4,032,258 1,193,865 0.30
- - -
- - -
22,177,418 18,932,835 0.85
No.of shares offered No. of shares bid No. of total times
12,096,774 7,384,521 0.61
6,048,386 2,011,036 0.33
4,032,258 825,132 0.20
- - -
- - -
22,177,418 10,220,689 0.46
No.of shares offered No. of shares bid No. of total times
12,096,774 4,947,752 0.41
6,048,387 3,395,661 0.56
4,032,258 368,733 0.09
- - -
- - -
22,177,419 8,712,146 0.39

Discussion on Sterling and Wilson Solar Limited IPO:

    Sir apply or not? please guide’,what is the final verdict? I am tired of losing money now.

    Risk in the Sterling and Wilson Solar business:

    1. As per CRISIL Research, demand for solar power has not developed as fast as many markets players have anticipated although the solar industry continues to experience increasingly lower costs, improved efficiency, and higher electricity output.

    2. They operate in a highly competitive market where bidding is the way to get EPC business. To win a particular project one should have pricing, technical and design, and engineering expertise, financing capabilities, past experience, amount and type of guarantees given and track-record better than a competitor.

    As they are operating as a separate, independent company for two years, they may not meet the bid requirements of track-record or technical and financial specifications on their own and recently they faced a similar issue in Vietnam to get a project where they were unable to count their prior 2017 experience.

    3. If EPC Projects are delayed it leads to penalties under EPC contracts and harms the reputation with their customers and other stakeholders. There is various factor which leads to such delays.

    a) the execution of a project in Argentina was delayed due to high-velocity winds.

    b) Namibia due to a transporters’ strike that disrupted operations.

    c) Morocco for various reasons, including extreme weather conditions and certain topographical challenges.

    d) Another project in Zambia was delayed due to difficult topographical conditions, such as sinkholes and limestone.

    4. Up to 35.76% of the Equity Shares are pledged in favor of a deposit accepting housing finance company, namely, Housing Development Finance Corporation Limited.

    5. They procure raw materials from different parts of the world. Recently the Ministry of Finance of the Government of India recently imposed a safeguard duty at the rate of 25% ad valorem minus anti-dumping duty payable on the import of solar panels from July 30, 2018 to July 29, 2019 (inclusive),which will be lowered to a safeguard duty at the rate of 20% from July 30, 2019 to January 29, 2020 (inclusive) and 15% for the six months from January 30, 2019 to July 29, 2020 (inclusive). Such safeguard duty will not apply to import of solar panels from countries notified as developing countries by the Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, pursuant to notification no. 19/2016-Customs (N.T.) dated February 5, 2016, as amended except the People’s Republic of China and Malaysia.

      SWSL is focused on utility-scale solar power projects and manages the solar projects from conceptualizing to commissioning. It provides operations and maintenance (O&M) services for the 3rd party projects as well . According to IHS Markit, the company was the world’s largest solar EPC solutions provider in 2018 based on annual installations of utility-scale PV systems. Currently, it has a wide presence across 26 countries.
      Sterling & Wilson offers customized solutions to its customers for solar power projects. The company follows a “hub-and-spoke” business model where India works as a hub for various services.
      World’s largest solar EPC solutions provider
      . A dedicated design and engineering team
      Takes benefits of the brand image of the SP group and S&W
      Strong financial performance
      The Price/Earnings ratio based on diluted EPS for fiscal 2019 for the issuer at the upper end of the Price Band is as high as 19.57.
      The average cost of acquisition per Equity Share for our promoter selling shareholders is nil per equity share.
      Company Promoters:
      The promoters of the Company are Shapoorji Pallonji and Company Pvt Ltd and Khurshed Yazdi Daruvala.
      Company Financials:
      Summary of financial Information (Restated)
      Particulars For the year/period ended (in Rs. 10 Lakhs)
      31-Mar-19 31-Mar-18 31-Dec-17
      Total Assets 53,919.19 49,203.81 35,701.70
      Total Revenue 82,404.08 68,717.08 32,324.81
      Profit After Tax 6,382.33 4,505.35 1,733.62
      Objects of the Issue:
      The objects of the Offer are:
      1. To achieve the benefits of listing the Equity Shares on the Stock Exchanges.
      2. For the Offer of the Equity Shares by the Promoter Selling Shareholders.
      3. To enhance visibility and brand image.