The Weight Dragging Down SWREL's Stock Price

Sterling and Wilson Renewable Energy (Formerly Sterling and Wilson Solar Limited) has had a pretty eventful journey post-pandemic. The firm, which was easily one of the high flyers in the sector, as a global EPC with export revenues accounting for 57% of revenues even till 2022-23, was tripped up by multiple factors sincethen. 

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When the company hit its peak with an IPO at Rs 780 per share in August 2019, it had revenues of over Rs 6,800 crores to show for FY18. Post IPO, as the pandemic hit operations, matters were compounded by a sharp rise in module costs from China. At a time when EPC firms were merrily signing up fixed cost contracts on the assumption of falling module prices, the price hike in FY2020 and beyond truly tripped up the firm, leading to significant losses on overseas projects. Luckily, by 2020, Reliance had also declared its ambitions in the clean energy space and was on the prowl for relevant acquisitions. SWREL fit in well with the mix for the conglomerate, as it came in as a strategic partner in 2021 at a price of Rs 375 per share. In 2023, to augment finances, the firm raisedRs 1,500 crores via a QIP at Rs 341 per share. 

Financials on the Mend

Although SWREL has made notable strides in recovery over the past four years since Reliance became involved, its share price has seen little momentum. After all, after peaking at a loss of Rs 1,175 crores in FY23 on revenues of Rs 2,015 crores, the firm finally delivered profits in FY25, on a topline of Rs 6,302 crores. Its order book has reversed completely, with 85% of future business in India focused now.  New order inflows in FY25 were at a comfortable Rs 7,051 crores.

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Q1 of FY26 has brought further good news, with topline growing to Rs 1,762 crore on a YoY basis (while falling 30% sequentially due to seasonality). Profit After Tax (PAT) jumped over 680% to Rs 39 crore as compared to Rs 4.83 crore in the same quarter last year. 

But the stock price remains relatively unaltered. What gives?     

Promoter Issues: The Key 

A persistent challenge for the company since its IPO has been the overhang of promoter borrowings. At the time of the IPO, promoters Khurshed Daruvala and Shapoorji Pallonji Group had hoped to repay borrowings worth almost Rs 2341 crores from part of the IPO proceeds by selling their shares. The failure to repay was blamed on liquidity issues at the group level.

The issues were further compounded due to missed payments and invocation of bank guarantees (BGs) worth ₹390 crore in July 2023, linked to overseas project execution failures.

A missed payment of ₹135 crore to Yes Bank on September 30, 2023, triggered a cross-default clause, exposing the company to a potential ₹516 crore liability.

Promoters — Khurshed Daruvala and the Shapoorji Pallonji Group — infused ₹418 crore on November 30, 2023, to prevent the company from being classified as a Non-Performing Asset (NPA) by lenders.

Indemnity Agreement and Promoter Obligations

• The promoters had signed an indemnity agreement during the 2021 stake sale to Reliance New Energy Ltd (RNEL), committing to reimburse SWREL for net liabilities exceeding ₹300 crore related to legacy issues (e.g., liquidated damages, tax litigations).

• Under this agreement:

  • SWREL received ₹90.14 crore in FY23 and ₹418.13 crore in FY24.

  • Claims must be submitted annually by 30th September, based on final settlements with customers and suppliers.

Presently, the promoters’ indemnity obligations are being fulfilled in tranches, and the company’s financial statements reflect contingent liabilities of ₹1,054.89 crore.

Is There a Final Deadline?

• While there is no single “final deadline,” the annual indemnity claim submission deadline is September 30 each year.

• The resolution is structured around ongoing settlements and annual reimbursements, rather than a one-time closure. It is this overhang and the failure to clean up the books once and for all that has made many investors skittish, even as smaller peers like Waaree Renewable Technologies, KPI Green, and many others have had a great run in the markets during 2022-24.

  However, looking ahead, the firm retains many strengths that should provide hope to its investors. A project pipeline of GW for one. Its O&M portfolio has grown from just 1.9 GW in FY18 to over 9.3 GW by Q1 FY26. It remains one of the best-placed EPC firms to offer comprehensive solutions for BESS projects as well as floating solar and more. A real push will come if order flows start from Reliance, for instance, which has a stated target of 20 GW of renewable energy for internal use by 2030. And, of course, an end to auditor notes every quarter on the continuing issues with troubled accounts, including promoter obligations to pay.