Sterling and Wilson: Refinancing Uncertainty Weighs

Sterling and Wilson

Ever since listing on the bourses, for Sterling and Wilson Solar it has been a rough ride and the near term outlook remains grim, given the unfavorable conditions.

The firm continues to struggle with its financing activities. And, to make matters worst local rating agency Ind-Ra has placed the company’s long-term issuer rating of ‘IND AA-’ on rating ‘watch negative’ from ‘stable’.

The rating watch negative reflects the uncertainty regarding the refinancing/rollover of SWSL’s short-term loans worth around Rs.1,180 crore maturing over the remainder of November 2019 until January 2020, the rating agency said in a release.

This follows the event on November 14, when Sterling and Wilson Solar released its September-ended quarter numbers. This is the first quarter of its performance after the company got listed in August.

At the time of listing, the promoters were supposed to pay Rs.2,563 crore to Sterling and Wilson Solar by November 18 (3 months after listing date). Of this, Rs.2,335 crore was the principal and Rs.228 crore was interest.

The promoters, on November 14, wrote to the Sterling and Wilson’s Board saying that they seek a revised payment schedule.

While they paid Rs.250 crore, for the remaining outstanding amount of Rs 2,341 crore (principal amount of Rs 2,085 Crore and interest of Rs.256 crore) as on September 30, 2019, they stated that due to the significant and rapid deterioration in the credit markets, has created a significant liquidity crisis, all of which was unforeseeable.

The company’s initial public offer (IPO) realised below expected funds which has put the promoters in a spot of bother. From the IPO, Sterling and Wilson realised Rs.2,850 crores before expenses and taxes, much lesser from their expectations of Rs.4,500 crore.

However, with the working capital requirement being very low, the impact of the below-expected fundraising was minimal according to Bahadur Dastoor, the chief financial officer of Sterling and Wilson Solar.

Meanwhile, the promoters endeavor to reduce the outstanding loan by Rs.1,000 crore from the level as of the date of listing, by December 31, 2019.

Sterling and Wilson Solar, a solar EPC (engineering, procurement, and construction) solutions provider, is the first company from the Shapoorji Pallonji stable that got listed recently. It has seen its share price fall dramatically from Rs.537 to Rs.289 after hitting two sessions of lower circuits.

What should Retail Investors do now?
We understand that IPO investors in Sterling & Wilson Solar have seen massive wealth destruction from day one mainly due to valuation concerns and now due to rating downgrades on the back of weal operating profitability numbers

Going ahead it is unlikely that the company may post a significantly improved financial in the near term which means there could be more downside left from here on also.

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