Sterling & Wilson Set to Merge its Waaree SPV with its Solar Arm

In a significant development, Sterling and Wilson Solar has approved the merger of Sterling & Wilson Waaree, with Sterling & Wilson Solar.

Sterling and Wilson Solar Limited is the solar engineering and construction arm of the Shapoorji Pallonji Group. Sterling and Wilson Waaree, a wholly-owned subsidiary of Sterling & Wilson Solar, was set up as a special purpose vehicle for the execution of a 9 MW project in Niger awarded by the country’s Ministry of Energy and Petroleum.

The appointed date for the merger is April 01, 2020. As per a filing made by the company at the Bombay Stock Exchange (BSE), no equity shares will be issued by Sterling & Wilson Solar to the shareholders of Sterling & Wilson Waaree as the entire capital of the latter is held by Sterling & Wilson Solar. After the merger, Sterling & Wilson Solar would hold the entire share capital of Sterling & Wilson Waaree.

As per the documents released by the company, the total income of Sterling & Wilson Solar stood at ₹83.658 billion (~$1.13 billion) as of March 31, 2019. As of December 31, 2019, the total income of Sterling and Wilson Solar stood at ₹32.665 billion (~$440.73 million).

The total income of Sterling & Wilson Waaree was recorded as ₹516.71 million (~$6.97 million) as on March 31, 2019, and the total income of the company as on December 31, 2019, was ₹22.17 million (~$299,130).

The board of directors believes that the merger would eliminate the existence of multiple entities and reduce the multiplicities of legal and regulatory compliances. The operational costs will reduce, and the management will be able to run it as a single unit more efficiently. The merger will lead to a pooling of financial resources leading to more effective and centralized use of funds, greater economies of scale, and stronger base for future growth.

As per the document, the merger would improve and consolidate the internal controls and functional integration at various levels of the organization, such as information technology, human resources, finance, legal, and general management leading to an efficient organization capable of responding swiftly to the rapidly changing market scenarios.

Recently, Sterling & Wilson released its consolidated and standalone financial results for the third quarter and nine months ended on December 31, 2019. The revenue of the company for the nine months of the financial year 2019-20 stood at ₹35.150 billion (~$492.9 million), and the gross profit margin for the same period stood at 13.1% as compared to 9.3% for the nine months of FY19.

In January this year, Sterling & Wilson Solar Limited paid ₹10 billion in dues (~$140.18 million) of its outstanding loan. This payment consists of the principal amount and the interest from the date of listing of the company’s shares in August until December 31, 2019.

Things are not going all that well for the company. In November, the promoters of the company, Shapoorji Pallonji Group and Yazdi Daruvala requested a revised payment schedule for the loans worth ₹23.41 billion (~$325.5 million) citing “significant and rapid deterioration in credit markets.” The outstanding amount stood at ₹25.63 billion (~$356.3 million) with the principal amount of ₹23.35 billion (~$324.6 million) and the interest amount of ₹2.28 billion (~$31.7 million) as of August 20, 2019, the day the company went public.

The company later clarified that the amounts mentioned in the letter dated November 14, 2019, were for two different dates and the amount of ₹23.41 billion (~$325.5 million) was only after taking into account the repayment of ₹2.5 billion (~$34.7 million) from the date of listing to the end of the first half of FY 2020.

The company has been making inroads in strategic markets like Australia and the US Currently. The company claims that it has nearly 8.8 GW of solar EPC projects as part of its portfolio in different stages of implementation.

In August last year, the company floated its initial public offering (IPO) targeting to raise ₹31.25 billion (~$442 million). The price band for the IPO was slated at ₹775 ($11.10) (floor price) to ₹780 ($11.17) (cap price).