SW Solar Hit By Disruptions, Estimates Impact At Rs 160-170 Cr For 2020-21

Sterling And Wilson Solar, India’s leading Solar EPC firm and among the global elite in the segment, had seen it fit to inform the stock exchanges of a material impact on its business on May 16. The impact related to the year ending March 2021, where the firm is yet to declare its Q4, and full year results.

In its communication, the firm had highlighted three issues which it believed would impact its margins and profitability for the full year.

– Following the insolvency of one of the Company’s prime sub-contractor in a particular geography, the Company has had to appoint alternate sub-contractor(s) at a higher price due to border restrictions and other impacts arising from the ongoing Covid-19 pandemic. This has also led to an increase in project timelines and consequential overheads which are material in this particular geography;

– The global Solar EPC industry has been impacted with several module manufacturers refusing to honour past price contracts given the sharp increase in cost of modules. Some of the Company’s module manufactures have also reneged on honouring their contractual commitments and have sought to substantially increase their module prices in two projects;

– Continued increase in commodity prices and freight costs remaining at their all time high.

The stock exchanges, in turn, asked for a clarification in terms of a specific estimate from the firm, to which, the firm, in a response yesterday, has communicated a figure of Rs 160- Rs 170 crore.

For Sterling and Wilson Solar, part of the Shapoorji Pallonjee Group, this marks the latest in its series of unfortunate incidents ever since its shares were listed, back in August 2019. Issued with a huge premium at a price of Rs 780, the firm has had to navigate through a series of issues related to its promoters inability to repay loans to the firm, repeatedly missing deadlines for the same, and setbacks on the contracts side. Some significant order wins have helped, but not enough to save a tanking stock, now under Rs 240, in a booming market.

While the firm has made these disclosures as a publicly listed firm, it is certainly not the only one to have been hit by the extraordinary situation in the past 6 months and more. At the EPC level, the distress is real, and set to continue, as many contracts closed in Q3 where work has not really started might have to be renegotiated even, following the steep module price jumps, and cancellations from suppliers.