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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 500.00 | ACUITE BB+ | Stable | Assigned | - |
| Bank Loan Ratings | 6215.50 | ACUITE BB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 284.50 | - | ACUITE A4+ | Reaffirmed |
| Commercial Paper (CP) | 100.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 7100.00 | - | - |
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Erratum: This Press release publishes the rectifications in the |
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Rating Rationale |
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Acuité has reaffirmed its short-term rating of ‘ACUITE A4+'(read as ACUITE A four plus) to the Rs. 100 Cr. of short-term commercial papers of Sterling and Wilson Renewable Energy Limited (Erstwhile Sterling and Wilson Solar Limited) (SWREL).
Acuité has reaffirmed its long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) and short-term rating of ‘ACUITE A4+'(read as ACUITE A four plus) to the Rs. 6500 Cr. of Sterling and Wilson Renewable Energy Limited (Erstwhile Sterling and Wilson Solar Limited)(SWREL). The outlook is ‘Stable’. Also, Acuité has assigned the long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) to the Rs. 500 Cr. bank facilities of Sterling and Wilson Renewable Energy Limited (Erstwhile Sterling and Wilson Solar Limited) (SWREL). The outlook is ‘Stable’. Rationale for rating The assigned and reaffirmation of the ratings take into the account the company’s improved liquidity position, average financial risk profile, an improvement in its performance in Q1FY2025, with the total revenue of Rs. 937.32 Cr. in Q1FY2025 as against Rs. 432.17 Cr. in Q1FY2024 reflecting a QoQ growth of 116.88%. The rating continues to positively factor in the company's established presence in solar segment and its strong parentage. The ratings are however, constrained by the decline in the revenues and weak earning profile during FY2021 to FY2023. Nonetheless, Acuite takes note of the improvement in the FY2024 financials as compared to FY2023 and a healthy order inflow that is expected to derive the revenue growth in FY2025. The ratings are however, constrained by susceptibility of the profits to the price volatility and completion of the projects on time. |
| About the Company |
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Mumbai based Sterling and Wilson Renewable Energy Limited (SWREL) was promoted by Shapoorji Pallonji and Company Private Limited (SPCPL) and Mr. Khurshed Daruvala and was a part of Shapoorji Pallonji Group (SP Group) and. In 2017, the Solar EPC business was demerged from Sterling & Wilson Private Limited and hence Sterling and Wilson Renewable Energy Limited was formed. Further, in FY2022 Reliance New Energy Limited acquired 40% stake (currently 32.6%) in SWREL. SWREL is engaged in EPC and O&M for Solar Power Plants. The company has a presence over 25 countries including India, Africa, USA, Australia, Latin America and the Middle East among other countries. The company has executed and under execution a total of more than 17 GW of EPC portfolio till March ’ 2024. SWREL is listed on BSE and NSE.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of SWREL to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Established presence in solar segment and strong parentage
Sterling and Wilson Renewable Energy Limited (SWREL) was a part of Shapoorji Pallonji Group and is promoted by Shapoorji Pallonji and Company Private Limited (SPCPL) and Mr. Khurshed Daruvala. Post demerger from Sterling and Wilson Private Limited (SWPL), SWREL was incorporated in 2017 and is engaged in EPC and O&M for Solar Power Plants. Further, in FY2022, there was an acquisition of stake in SWREL by Reliance New Energy Limited (REL), a subsidiary of Reliance Industries (RIL). Currently REL owns 32.6% stake in SWREL. SWREL is one of the leading Solar EPC players globally. Further, the company has executed more than 17 GW capacity across geographies including Australia, USA, Asia, Africa, Latin America and Middle East amongst others. The company has set up its largest single location Solar Photovoltaic Plant of 1177 MW in Abu Dhabi. The extensive experience of one of the promoters in the infrastructure sector and its established position in the Solar Industry has also helped SWREL to generate healthy and diversified order book. Further, SWREL has executed projects for reputed clientele such as Neoen, Light Source BP, Soft Bank, Marubeni, Total, Shell, and TAQA to name a few. Acuité believes, SWREL will continue to benefit from its established position in the solar segment and healthy order book position backed by strong parentage and the group’s presence of more than 200 years. Improvement in yearly and quarterly performance and healthy order inflow SWREL has reported an improvement in its performance in FY2024, with the revenues of Rs. 2706.17 Cr. improved against Rs. 1459.10 Cr. in the previous FY2023. Furthermore, the EBITDA during FY2024 has turned positive to Rs. 175.98 Cr. against losses of Rs. (377.50) Cr. during FY2023. PAT margin also improved from (24.33%) in FY23 to 3.22% in FY24. SWREL has an unexecuted order value of over ~Rs. 9397.76 Cr as on June 2024. SWREL has reported an improvement in its performance in Q1FY2025, with the total revenue of Rs. 937.32 Cr. in Q1FY2025 as against Rs. 432.17 Cr. in Q1FY2024 reflecting a QoQ growth of 116.88%. The company reported PBT of Rs. 82.97 Cr. in Q1FY2025 as against Rs. (22.80) Cr. in Q1FY2024. The operating performance of the company is expected to be better in FY2025 supported by healthy order inflows and better emphasis on the domestic orders that will garner higher EBITDA. Acuité believes continuous and timely conversion of orders along with improvement in the overall operating performance of SWREL will remain critical to SWREL's future growth. Average financial risk profile SWREL’s financial risk profile remains average marked by moderate net worth, relatively low gearing and below average debt coverage indicators. The net worth of the company stood at Rs. 2675.97 Cr. as on March 31, 2024, compared against Rs.1163.45 Cr. as on March 31, 2023. The gearing level of the company improve to 0.18x as on March 31, 2024, as against 1.58x as on March 31, 2023. The company has a total debt of Rs. 476.66 Cr. as on March 31, 2024, as against Rs. 1840.18 Cr. as on March 31, 2023. Furthermore, the debt protection matrices of the company improved with interest-coverage-ratio and debt-service-coverage-ratio of 1.48 times and 0.71 times for FY24 as against -0.94 times and -0.79 times in FY23 respectively. |
| Weaknesses |
| Working Capital intensive operations
SWREL’s working capital operations improved marked by Gross Current Asset days (GCA) of 690 days for FY24 as against 861 days for FY23. Gross current asset includes loan to subsidiary and indemnity receivables. The receivables days stood at 88 days for FY24 as against 137 days for FY23. The improvement in receivable days is majorly on account of improved collection efficiency from its projects. The creditor days stood at 233 days in FY24 as against 132 days in FY23. Average utilization of fund-based bank limits remains negligible at 1.53% and average non fund based utilisations is 61.24% for the six months ended June 2024. Susceptibility of the profits linked to risks associated with price volatility and timely completion of the projects The company undertakes EPC contracts for construction of solar power projects across geographies which stipulates timelines for the completion of the project as per the agreed schedule and cost. Additionally, the profitability is susceptible to volatility in module prices pertaining to 20% of the order book. Acuité believes that the company’s ability to maintain its operating profitability despite the disruptions will remain a key rating sensitivity. |
| ESG Factors Relevant for Rating |
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SWREL is a renewable power producer based on solar photo voltaic technology and therefore, directly contributes to the reduction of carbon emissions. The other material factors from the environmental perspective are green supply chain and waste management. On the social front, occupational and workforce health & safety management are of primary importance to this industry given the nature of operations. The policies on responsible procurement and product safety as well as quality are of utmost significance.
On governance front, the company has adopted requirement of Corporate Governance from Provision of Companies Act 2013 and SEBI (LODR) Regulations 2015. The board of directors comprises of professionals having expertise and experience in diverse backgrounds such as construction, finance, banking, regulatory affairs, administration and management and technical operations of power plants. Hence, diverse board of directors ensures pooling of knowledge and balanced board. The governance factors that play an important role are ethical business practices, board oversight and management compensation. Further, risk management practices to minimize corruption associated with electricity distribution plays a crucial role. Additionally, regulatory compliance, shareholder’s rights and audit control are other material issues in the power generation industry. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity position is adequate as the company raised Rs. 1500 Cr. through QIP and received ~Rs. 600 Cr. from the indemnity and the customer claims during the year FY2024. These funds have been utilised towards the payment of the overdue debt and partially towards the prepayment of term loans. Further, the scale of operations and the earning profile of the company is expected to improve in FY2025 with healthy order book. Also, the company has also earmarked Rs. 75.00 Cr. towards the payment of debt obligations of Rs. 156.83 Cr. in FY2025. The cash and bank balance is reported at Rs. 263.04 Cr. as on 31st March 2024. Besides, the liquidity is supported by cushion in the fund-based limits with 1.53% of average utilisation during the last six months ending June 2024.
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| Outlook: Stable |
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Acuité believes SWREL will maintain a ‘Stable’ outlook over the medium term on account of its experienced management and a healthy order book position. The outlook may be revised to 'Positive' in case the company achieves higher than expected growth in scale of operations while maintaining improving its profitability and credit profile. Conversely, the outlook may be revised to 'Negative' in case of a slower than expected growth in revenues, delay in completion of its projects impacting its liquidity profile.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 2706.17 | 1459.10 |
| PAT | Rs. Cr. | 87.25 | (355.02) |
| PAT Margin | (%) | 3.22 | (24.33) |
| Total Debt/Tangible Net Worth | Times | 0.18 | 1.58 |
| PBDIT/Interest | Times | 1.48 | (0.94) |
| Status of non-cooperation with previous CRA (if applicable) |
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Not applicable
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| Any other information |
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“All members who participated in the rating committee hold interest in M/s Reliance Industries Ltd (RIL), which through its wholly owned subsidiary M/s Reliance New Energy Limited, holds 32.6% stake in STERLING AND WILSON RENEWABLE ENERGY LIMITED (SWREL).”
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| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Commercial Paper: https://www.acuite.in/view-rating-criteria-54.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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| *Note: Bank guarantee facilities rated at Acuite BB+ (Stable) and the letter of credit rated at Acuite A4+ are fully interchangeable. |
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