Sterling & Wilson Solar promoters fail to honour loan commitment

Mumbai: The promoters of Sterling and Wilson Solar (SWSL), Shapoorji Pallonji Group and Khurshed Yazdi Daruvala, failed to honour their commitments made during the initial public offering (IPO) in August and sought more time from the company’s board to repay loans worth Rs 2,341 crore citing unforeseen reasons including a liquidity crisis at the group level.

Lawyers, Activists Slam Management
The company had borrowings of Rs 2,259 crore at the end of September. In its stock exchange filing, SWSL said the promoters had said in their letter to the board that they would “endeavour to reduce the outstanding loan by Rs 1,000 crore from the level as of the date of listing, by December 31, 2019”.

Corporate lawyers and activists slammed the company’s management for keeping investors in the dark. “Change in the repayment terms is a complete breach of trust and Sebi (Securities and Exchange Board of India) should step in,” said Huzefa Nasikwala, founder partner, Nasikwala Law Office.

Shriram Subramanian, managing director, InGovern Research Services, said Sebi had taken stern action against several companies in the past for not fulfilling the objective or purpose of the IPO prospectus. “In this case also, the regulator should intervene and investigate where the IPO proceeds were used by the promoters,” he said.

SWSL’s management said in a conference call with investors on Friday that it was working on a revised payment schedule, but without specifying a time frame for the balance payment.

Domestic investors criticised the company’s management during the conference call for not disclosing other commitments of the promoters over the repayment of loans from the IPO proceeds.

Sanjay Chawla, chief investment officer at Baroda Mutual Fund, told the management that the fund house was extremely disappointed that the promise made at the time of IPO was not kept and that it was not kept informed about the delay in repayment. Abhinav Bhandari, fund manager at Nippon AMC, said the way the revised debt repayment schedule was handed was disappointing for the minority shareholder.

Shiladitya Dasgupta, fund manager at ICICI Prudential Life Insurance, said the management in its meeting with the insurer had indicated that repayment of the money through the IPO proceeds would be the topmost priority and that nowhere had the company highlighted that there were other commitments too.

Promoter Daruvala, who’s also SWSL chairman, said that there were liquidity challenges at the group level. He said the company had “high degree of confidence of payment three weeks and even just 10 days before”. “However, things have changed (more) significantly than we have anticipated,” he said.

SWSL has an asset-light business model and has negative working capital. So, it does not require debt for operational purposes. However, the company’s debt increased substantially on account of restructuring due to the demerger, whereby its debt swelled and it extended loans and advances to the group company. In April 2017, Sterling and Wilson demerged its solar EPC division along with assets and liabilities into SWSL.