Cyrus Mistry's Sterling & Wilson was at the right place at the right time for Mukesh Ambani's green energy ambitions

• Shares of Sterling & Wilson Solar surged as much as 17% on Monday as Reliance Industries bought a 40% stake in the company for ₹2,845 crore triggering an open offer.
• The 150-year-old Shapoorji Pallonji Group has an overall debt of around ₹20,000 crore and has been selling assets to repay bank loans.
• To pare its debt, reports said the Mistry family may also pledge its 18% stake in Tata Sons, the holding company of Tata Group.

Three months ago, Sterling & Wilson Solar was struggling to arrange working capital to run the company after incurring losses in the financial year 2021.

Cut to October, it has found a partner in India’s richest man, an order book of reportedly $1.05 billion (₹ 7,936crore) and a partnership with India’s richest man. The share price of Sterling & Wilson is up 52% in the last six months and the market value of the company has now breached ₹7,370 crore (nearly $1 billion).

The core business was never the problem

While the losses at the end of June 2021 amounted to ₹76 crore, it was largely due to cash crunch, uncompleted projects in Australia due to bankruptcy plea filed by the prime subcontractor in one of the projects along with unavailability of labour in lockdown.

With over 11 GW of solar turnkey projects executed globally and more than five decades of engineering experience, SWSL provides end-to-end solar engineering, procurement, construction (EPC) solutions with a 3,000-member team and presence across 24 countries.

And that’s may be why Sterling and Wilson Solar caught the attention of Mukesh Ambani, one of the 10 richest people in the world. On October 10, Reliance Industries bought a 40% stake in the SP Group company for ₹2,845 crore ($377 million).

Here’s how the company overcame the cash crunch

Sterling & Wilson’s promoters, the Shapoorji Pallonji (SP) Group, which has interests ranging from real estate to textiles to biotechnology ⁠— itself is facing a cash crunch and a debt that has ballooned to ₹20,000 crore.

The company’s promoters including Cyrus Pallonji Mistry, Shapoorji Pallonji and Co and Khurshed Yazdi Daruvala hold over 69% stake in Sterling and Wilson Solar. They, reportedly, missed the deadline to repay the remaining ₹1,148 crore to Sterling & Wilson out of the ₹2,644 crore promised at the time of the company's initial public offer (IPO), which hit the market in August 2019.

This took the market by surprise and the stock went down 17% in the four months that followed. “Once the loans are repaid, we should be focusing on growth aggressively and increasing shareholder value," Bikesh Ogra, chief executive officer at Sterling & Wilson Solar, had said in February this year.

The promoters started to sell some of the other businesses including a stake in Eureka Forbes to global private equity firm Advent International for ₹4,400 crore.

Eureka Forbes is known for the Aquaguard brand, a household name in water purification, besides Forbes vacuum cleaners.

In April last year, the group sold five solar assets to KKR & Co for ₹1,550 crore. The promoters of the SP Group, the Mistry family, also raised ₹4,500- ₹5,000 crore from credit fund Ares SSG and US hedge fund Farallon Capital in March to meet their immediate liquidity concerns.

Promoters (the Mistrys) have also infused funds in group companies from borrowings.

To pare some of its debt, the Mistry family wanted to pledge its shares in Tata Sons, but couldn’t do so. The Mistrys own a stake of 18% in Tata Sons, the holding company of Tata Group.

Reports say the Mistrys are now planning to sell debentures against shares of Tata Sons and raise ₹6,600 crore.

With the cash crunch out of the way, and a partner like Ambani ⁠— with his towering ambitions in renewable energy ⁠— investors of Sterling and Wilson Solar hope that their fortunes have turned for the better after a long wait. “SWSL is now well-poised to make a valuable contribution, as the world transitions to a low-carbon economy. I believe this partnership is beneficial to all stakeholders and will greatly contribute to making India a leading green energy powerhouse,” said Shapoor Mistry, chairman of Shapoorji Pallonji & Co commenting on the RIL deal.

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