Sterling and Wilson Q1 2020-21 Results. Familiar Problems Continue To Dog Numbers

Sterling and Wilson Solar Limited has just declared its results for Q1 of the financial year 2021-21, and the numbers don’t make for pretty reading at all. The firm’s legacy problem of timely debt repayment from its promoters, despite assurances after the previous quarter results and analyst calls, continues to fester, something that will not inspire confidence at all. On top of that, the ‘lumpiness’ of earnings as an EPC player, combined with the Covid outbreak, has ensured that the firm has a very poor set of numbers to show for the quarter.

Total income for the April may June period (Q1) period, at Rs 1099.38 crores,  a big drop of 16 percent over the previous quarter (Q4) , while profit dropped 60  percent drop over the corresponding quarter of 2019-20. That meant net profit came in at 17.22 crore for the period, and a consolidated net profit of over Rs 46.01 crores .

On the issue of debt repayment from its promoters where the current outstanding was over Rs 1200 cores, the note from the firm’s auditor has this to say. Out of the June installment of Rs 500 crores, only Rs 103.47 crores could be arranged by the promoters, leaving a further Rs 396.7 crores pending. The promoters were to repay another Rs 500 crores in September. Considering the ground situation, the board has seen fit to extend the period of repayment to September 2021 now, with a further 400 basis points added to the interest rate on the total outstandings, besides exploring ways to further secure the amount by way of securities offered by the promoters.

In an otherwise poor picture, perhaps the only silver lining has been the continued growth in the Operations and Maintainance (O&M)segment revenues,  which continue to grow robustly over the previous as well as the corresponding quarter of the year. The O&M revenues area segment that the firm has high hopes on, hoping to grab both the market opportunity and the element of predictability on earnings they offer, as compared to its primary project related revenues.

While the firm’s management is due for a conference call with market analysts later this week, there is little doubt that it will have to front up for yet another tough grilling. It is striking how different the experience for the firm has been on the capital markets, as compared to developer  Adani Green, whose stock has grown 1100 percent in the past two years.

For Sterling and Wilson Solar, the Q1 results for 2020 have yet again brought into focus the wisdom of going for a capital market listing, as it does seem that the stock has a long way to travel to regain market confidence. At this rate, there might be a case for delisting after the mandatory listing period ends in 2022, considering how undervalued the firm might consider itself, if it actually delivers on the promise of recent project wins and delivers better results in the coming quarters.

The firm also continued its by now familiar pattern of delivering the results well behind most firms, and that too, late into the night.