Stock Fundamentals

Sterling and Wilson Solar IPO: Subscribe

Vivek Ananth | Updated on August 06, 2019 Published on August 04, 2019

Growth potential in the solar power sector and strong execution track record are positives

The race to set up solar power projects across the world has given an opportunity to engineering procurement and construction (EPC) contractors to help power utility companies implement large projects. One such large EPC player in the solar power space — Sterling and Wilson Solar — is offering nearly up to 4.03 crore shares (offer-for-sale) through the IPO. Investors looking to play the long-term growth prospects in the sector, can invest in this IPO.

There is no listed peer for Sterling and Wilson Solar either in the Indian market or globally. The 12-month trailing price-to-earnings multiple is around 19.45 times, which seems a little expensive. But good growth potential in the solar power sector and the company’s strong track record of execution, make it attractive.



Sterling and Wilson Solar (SWSL) was formed by the demerger of Sterling and Wilson Private Ltd (SWPL)’s solar EPC business. The demerger was approved in March 2018 to be effective from April 1, 2017. Sterling and Wilson Solar took over all the assets and liabilities of SWPL’s solar EPC business.

Sterling and Wilson Solar and SWPL are subsidiaries of Shapoorji Pallonji and Company Private Limited (SPCL). Sterling and Wilson Solar’s promoters also include Khurshed Daruvala, the chairman of the company, who holds 33 per cent stake (pre-IPO). Both SPCL and Khurshed Daruvala together are selling up to 25 per cent stake in the IPO offer. They expect to garner around ₹3,125 crore from this issue.

The promoters intend to use part of the funds raised through this IPO to pay off the debts owed to Sterling and Wilson Solar by another company in the group.

Deep expertise

Sterling and Wilson Solar has deep expertise in implementing large solar EPC projects. It has a capable management team that has executed the largest solar power plant in Abu Dhabi on turnkey basis (end-to-end EPC solution). This plant has an installed capacity of around 1.17 GW (1GW = 1,000 MW).

In 2018, it had a market share of 40.4 per cent of the solar EPC market in West Asia, 36.6 per cent in Africa and 16.6 per cent in India. The company had a global market share of 4.6 per cent of the solar EPC business as of 2018.




Nearly 70 per cent of the Sterling Wilson Solar’s revenue comes from outside India; the company says it earns a higher margin from executing projects outside India. But it still plans to bid for projects in India, given the growing opportunity. India plans to have nearly 300 GW of solar power capacity by 2030.

Sterling and Wilson Solar has an installed capacity of 5,271 MW as of March 31, 2019, while it has nearly 1,600 MW of projects under implementation. It also operates and maintains (O&M) most of the projects it executes; this is included in the bid for the EPC project.

The company also has some third-party operation and maintenance (O&M) contracts. It has nearly 5.56 GW of solar power plants under O&M contracts, of which 28.3 per cent are third-party contracts. For 2018-19, 98.9 per cent of revenue came from the EPC business and the rest from O&M.


The company has presented financials for only two completed years — 2017-18 and 2018-19. However, carved out financials for 2015-16 and 2016-17 of the SWPL Solar EPC division is reported, but not strictly comparable.

The company has presented full financials for March 9, 2017 to March 31, 2018 and April 1, 2018 to March 31, 2019. The net profit between these two periods rose 41.7 per cent to ₹638.23 crore, while revenue rose nearly 20 per cent to ₹8,240 crore. In 2018-19, EPC business earned gross margins of 11.57 per cent, while O&M earned 43.55 per cent gross margin. The blended margin for 2018-19 was 11.9 per cent compared to 10.9 per cent a year ago.

It has an order book of about ₹3,832 crore as of March 2019 and has won bids and received letters of intent for another ₹3,908 crore. This shows a decent pipeline of projects.

The solar EPC contractor has a debt of around ₹6,741 crore (which includes non- fund based debt of Rs Rs 4,303 crore), according to the RHP. A part of the fund based debt includes an inter-company loan given to a group company which will be repaid by the promoters using the proceeds of the OFS.

A power utility reneging on its commitment could impact the company.

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Published on August 04, 2019
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