Sterling and Wilson Solar Ltd.: Sterling and Wilson solar falls 20% more, but still no buyers

Several investors, including institutions and funds, were unable to secure an exit in the Sterling and Wilson Solar (SWSL) counter on Monday, with the stock plunging another 20 per cent after the promoters — the Shapoorji Pallonji Group and Khurshed Yazdi Daruvala — sought “an extension of time for repayment of intercompany dues” due to what they described as a “rapid deterioration in credit markets.”

On Monday, more than 2 million shares were on offer to be sold, but there were no buyers.

Analysts, investors and corporate lawyers said that there was a “sudden change” in the terms of the contract related to objects referred to in the offer document. The stock, which listed on August 20, has declined 58 per cent from the offer price of Rs 780 to close at Rs 321 on Monday.

As per the IPO prospectus, the promoters were to use the proceeds to repay the entire inter-corporate loans by November 18, within 90 days of the date of listing, and promoters were able to pay only Rs 250 crore so far. On Friday, promoters sought more time from the company’s board to repay loans worth Rs 2,341 crore citing unforeseen reasons, including a liquidity crisis.

“The promoters’ image was badly damaged …and investors buying shares on the IPO statement that the company (SWSL) would be debt-free by November 18 are now stuck,” said Amreesh Baliga, an independent analyst. “Given the fact that it was held out to the potential investors in the offer document that monies arising out of the offer for sale by the promoters would be utilised for repaying the loans, non-repayment is a breach of the disclosure that calls for regulatory intervention.”

Sebi regulations provide a detailed framework for ensuring that all relevant information on an offer is religiously disclosed to investors, including the purpose of raising funds and the mode and manner of deployment of funds so raised.

According to Vinay Chauhan, partner, Corporate Law Chambers India, the breach assumes significance since the promoters themselves are involved, and the request to seek extension for repayment of loans to the company citing unforeseen circumstances would require deeper scrutiny. “ICDR Regulations provide that in case there is any variation in the terms of contract related to objects referred to in the offer document, the promoters or the persons in control of the issuer company shall provide an exit offer to the dissenting shareholders as provided in the Companies Act 2013,” he added.

Shapoor Mistry, chairman of the Shapoorji Pallonji Group, told ET earlier that the promoters would stand by the company’s repayment commitments, and that a delay does not mean dishonouring that pledge. “We want to reiterate that the request for an extension of time for the repayment of the intercompany dues does not in any way dilute our intent to honour these payments,” Mistry said.

Institutional investors said the management ought to have specified the time-frame for repayment in the conference call held recently.