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Object of the offer

Sterling & Wilson Solar Limited (SWSL) is coming out with an initial public offering (IPO) with offer for sale of 4.01-4.03 crore equity shares with face value of Rs. 1. The issue is priced at Rs. 775-780 per share and size of the issue is Rs. 3,125 crore. The objective of the issue is to carry out disinvestment of shares held by the promoter. SWSL will not receive any proceeds from the offer.

Company Background

SWSL was incorporated in 2017. The company provides solar engineering, procurement and construction (EPC) solutions. SWSL focuses on utility-scale solar power projects and manages solar projects from conceptualising to commissioning. The company also provides operations and maintenance (O&M) services for third-party projects. The company is present across 26 countries.

Key investment positives

Largest global solar EPC solutions provider in a fast-growing solar industry

SWSL is the world’s largest solar EPC solutions provider with a market share of 4.6% in 2018 (vs. 0.3% in 2014) in annual installations of utility-scale PV systems of more than five MWp according to IHS Markit. The company is also a leading solar EPC solutions provider in India, Africa and Middle East with 16.6%, 36.6% and 40.4% market share, respectively, according to IHS Markit. Annual solar installations in India, South East Asia, the Middle East, North Africa, rest of Africa, Europe, the U.S., Latin America and Australia could report a 20% CAGR to 84.8 GW in 2021 from 49.1 GW in 2018, according to IHS Markit. The company’s solid execution track record, strong customer relations and cost-effective engineering project designs make SWSL well positioned to benefit from this. As of March 31, 2019, the company has received letters of intent of Rs. 3,908 crore for solar power projects for which it has won the bid, but has not yet executed definitive EPC contracts. The company’s order book was Rs. 3,832 crore as of March 31, 2019.

Strong parentage and ability to leverage the global ‘SP’ brand

The company benefits from brand reputation, industry relationships and project management expertise of the Shapoorji Pallonji (SP) Group and Sterling and Wilson (S&W) Group. The SP Group is a global conglomerate and has over 150 years of experience as an EPC solutions provider in six major business areas and operations across 45 countries. Currently, S&W has over 90 years of offering EPC solutions and operates across various industries, including mechanical engineering and plumbing, co-gen solutions, transmission and distribution, turnkey data centres, diesel generators and renewable in 34 countries. For example, SP Group’s presence in the Middle East, Africa and South East Asia assisted SWSL in accessing these markets.

Strong financial performance

SWSL’s consolidated revenue reported a 44% CAGR over FY2016-FY2019, with consolidated EBITDA and net profit growing at 63% and 73%, respectively. Revenue from outside India accounted for 59.1% and 69.8% of SWSL’s total revenue from operations in FY2018 and FY2019, respectively. 

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