Sterling & Wilson Renewable Energy Limited
Know the Company
Sterling & Wilson Renewable Energy Ltd (SW Solar) commenced operations in 2011 and was earlier a part of India’s one of the oldest business groups – Shapoorji Pallonji Group. In 2022, Reliance Industries Limited acquired a 40% stake in the company through its subsidiary, Reliance New Energy Limited (RNLE), which holds a 32.54% stake in Sterling & Wilson as of June 30, 2024. The company is a global leader in renewable energy solutions, offering comprehensive engineering, procurement, and construction (EPC) services. It provides utility-scale solar, floating solar, and hybrid energy storage solutions. Additionally, the company offers Operations & Maintenance (O&M) support for its own projects as well as those developed by third parties. Its presence including India, Southeast Asia, the Middle East, Africa, Europe, Australia, and the US.
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Business Segments
SW Solar operates in two main business segments such as EPC and Operations & Maintenance. The company is a leading solar EPC player across 28 countries, with a current EPC portfolio of 18 GW. While its core focus is on project design and engineering, it efficiently manages all aspects of project execution, from conceptualization to commissioning. The company’s turnkey EPC solutions encompass design, engineering, procurement, construction, project management, testing, supply, installation, commissioning, operation, maintenance, and grid connection of solar power projects.
All of the company’s projects include design and execution services for Balance of System (BoS) solutions, excluding module and component procurement. The company also has extensive experience with various technologies, including crystalline modules and single-axis tracker string inverters. Additionally, it offers solar-plus-storage solutions.
Strengths
SW Solar is a global pure-play provider of end-to-end solar EPC solutions, from concept to commissioning, with an asset-light business model. The company’s strong track record in executing complex and large-scale EPC projects has led to high customer retention and repeat business. It offers EPC services for utility-scale solar, floating solar, hybrid, and energy storage solutions. With a total EPC portfolio of 18 GW, the company also manages an operation and maintenance portfolio of approximately 7.67 GW of solar power projects, including those constructed by third parties.
The Company successfully commenced the pilot project for solar plus battery energy storage systems for Reliance Industries at Jamnagar, Gujarat. It looks forward to engaging with them in large PV project installation across the country in the near future.
Technological advancements and economies of scale are making solar power increasingly cost-competitive with traditional fossil fuels, paving the way for the widespread adoption of renewable energy. Improvements in storage technology and smart grids are enhancing the efficiency and reliability of solar power, revolutionizing the renewable energy landscape. In recent years, the price of solar panels in India has been on a downward trajectory, making solar energy more accessible. The decline in solar panel prices is due to several factors including a significant drop in module prices, stabilization of raw material and logistics costs, a surplus in the supply of components such as wafers and cells, and the introduction of new production capacities in China, all contributing to the sustained low module prices.
SW Solar continues to secure repeat projects from its existing customers in India, who are themselves undergoing significant expansion and consider the company as a key and preferred partner for their journey. In FY2024, SW Solar achieved several prestigious project wins, including its third solar EPC contract from NTPC REL at the Khavda RE Power Park in Gujarat. This contract, including three years of operation and maintenance, valued at Rs 1,535 crore. The company is also poised to become one of the leading EPC solutions providers globally, thanks to its extensive global reach, strong relationships with customers and lenders, and vast experience in project execution. The partnership with RIL has further solidified the company’s position as a global EPC leader and a top player in Solar O&M.
India is increasingly turning to solar energy as a sustainable and reliable solution amid growing environmental concerns and energy security challenges, prioritizing a shift towards cleaner alternatives. Government support for the solar sector is evident through initiatives such as the National Solar Mission, central-level allocations, and operational assistance for solar projects. The establishment of solar parks has been crucial in mitigating construction risks, with 25 states actively preparing land banks for these parks. To secure sufficient funding for the renewable sector, the government has introduced various measures to ensure the availability of low-cost finance for solar projects. These measures include funding from government lending institutions such as PTC India Financial Services Limited (PFS), Rural Electrification Corporation (REC), and Indian Renewable Energy Development Agency (IREDA). Additionally, India has developed a green bond market with guidelines published by SEBI, facilitating investments in green energy projects.
Apart from India, the Company has been delivering projects in the most demanding geographies including the US, Australia and Chile. The Company’s excellent execution track record and access to cutting-edge technology, reinforces its commitment to delivering all projects successfully. With a stronger balance sheet, the company expects to capture a larger share of the domestic solar EPC market this fiscal year. In terms of its pipeline, the company is actively pursuing projects totalling 23 GW in India and 5 GW in other regions, including the Middle East, Europe, and Africa.
Strong Order Book
SW Solar has continued on the order booking momentum in Q4FY 2024 receiving new orders worth Rs 2,170 crores, and it closed the full year at approximately Rs 6,000 crores of orders inflow. The company’s total order book position at the end of June 2024 stood at around Rs 9400 crore.
Order inflow in Q1 FY25 was a mix of both international and domestic orders. The company secured a significant breakthrough in the rapidly growing South African solar market with two turnkey project wins totaling US$140 million. One of these orders was a 140-megawatt DC project for AMEA Power, a long-standing customer, while the second was an 80-megawatt AC project with the Energy Group. EPC business in India for the Company continues to remain robust, and it received new orders and LOIs in 3 domestic projects worth Rs 1,016 crores during the latest quarter. The Company was able to achieve another breakthrough with Serentica Renewables by bagging a 900-megawatt DC project in Rajasthan, which is one of their largest solar installations in the country. SW Solar continues to work with Serentica on multiple other projects across India and become their preferred partner.
Financial Results
SW Solar reported net profit of Rs 4.8 cr in Q1FY25 as against a net loss of Rs 95.3 crore in the year-ago period. The company’s total income rose to Rs 928 crore from Rs 522 crore in the same period. The expenses stood at Rs 913 crore during the quarter as against Rs 618 a year earlier.
The company’s balance sheet has strengthened further, with borrowing decreasing sequentially by approximately Rs 19 crore in Q1 FY25, bringing net debt to Rs 97 crore as of June 2024. The company does not have any debt repayments due until Q3 FY25 and expects indemnity payments due by November 2024 to cover repayments primarily in FY2025.
Outlook
India’s growing population and flourishing economy have fuelled a surge in energy demand, which is expected to increase by 7% to 8% annually over the next 5 to 7 years. Renewable energy will be a key driver of future investments in the power sector. Despite numerous challenges, India has made significant progress in its energy development, particularly in solar power.
As of August 2024, India’s renewable energy sources, including large hydropower, have a combined installed capacity of 199.52 GW, with solar power contributing approximately 89.4 GW. The Government of India has set a target to reduce the carbon intensity of the nation’s economy by more than 45% by 2030 and to achieve 50% of cumulative installed electric power capacity from renewable sources. Consequently, India aims to reach 500 GW of renewable energy installed capacity by that period. India has remained committed to its clean energy transition, achieving the fastest pace of renewable capacity addition among major economies. This is aligned with the ambitious goals set by Prime Minister Modi in India’s ‘Panchamrit’ declaration at COP26. As part of this effort, India set an ambitious target to achieve Net Zero emissions by 2070.
India remains SW Solar’s primary focus market for the immediate future. The growth of renewable energy installations is expected to significantly accelerate the domestic order pipeline in the coming years. Such rapid expansion often drives players to concentrate on core competencies and execution, which is likely to benefit established EPC players like SW Solar.
SW Solar’s unexecuted order book currently stands at Rs 9400 crores comprising approximately 71% from domestic orders and the rest is from international. The share of domestic orders has declined in the latest quarter due to a higher inflow of international orders. The Company remains confident of domestic order inflows in the forthcoming quarters picking up, especially as PSU order inflow activity was muted in Q1 on account of the union election.
It is expected that solar module prices continue to remain low globally, which creates a favorable situation for more projects to come, supported by lower Levelized Costs of Energy (LCOEs), which should lead to more opportunities for EPC players like SW Solar. With a strong balance sheet, the Company is well-positioned to capitalize on the robust growth in the industry in both domestic and international markets.
Key Challenges
The Indian solar EPC industry, despite its rapid growth, faces several challenges, which can impact project timelines, profitability, and the overall development of the solar energy sector. A significant challenge of the solar energy industry is that it is a highly competitive market, characterized by intense bidding wars among numerous players. This cut-throat competition often results in thin profit margins for EPC companies. Further, the pressure to offer competitive prices can dent their ability to absorb unexpected costs or invest in research and development.
The price of solar modules is significantly low these days, primarily due to competition from Chinese companies, which benefits solar EPC companies like SW Solar. However, any price increase may adversely affect the profit margins of these EPC companies.
Sector: Industrials
Market Price: Rs. 732.75 as on today
FV: Rs 1/-
Stock Name: Sterling & Wilson Renewable Energy Ltd
BSE Code: 542760, NSE Code: SWSOLAR
Market Cap.: ₹16817 Crore
Book Value: Rs. 41.6
Segment: Solar- EPC
Incorporation: 2011
Headquarters: Mumbai, India
