Legal Cases & Losses Mark Sterling & Wilson's Investors' Call

The latest investors’ call of Sterling & Wilson Renewable Energy (SWREL) was marked by queries, concerns, and criticism from shareholders over the EPC company’s handling of legal cases and their impact on financials. The company, however, sought to reassure investors, describing the issues as having a “one-time non-cash impact.”

At the outset of the call, C.K. Thakur, Global Chief Executive Officer (CEO) of the firm, explained that three major legal cases involving its U.S. subsidiary had contributed to the reported loss in the group’s Q2 results.

The management clarified that its U.S. subsidiary, Sterling & Wilson Solar Solutions Inc. (SWSS), faced an unfavorable arbitral ruling. The Arbitral Tribunal, in its interim award, dismissed SWSS’s claims amounting to₹485.64 crore,while the counterparty, Conti LLC, was granted an award of around ₹56.8 crore with interest.

Management's Clarification 

“As this amount of ₹485 crore was reflected as receivables in our consolidated books, we have fully written off this amount during the quarter. Consequently, this resulted in a one-time non-cash impact on our profit and loss statement for Q2 FY26 and a corresponding reduction in our consolidated net worth. Accordingly, we have written off an amount of ₹580 crore in our books for the award value, including applicable interest and legal charges payable towards Conti LLC,” the management told investors.

Additionally, during the quarter, the company said that a customer invoked a Standby Letter of Credit (SBLC) amounting to USD 7.19 million (approximately ₹63.47 crore), which was subsequently honored by the issuing bank and reimbursed by SWSS. The group also concluded a mutual settlement with OEG Inc., another U.S.-based counterparty, resolving another litigation.

Settlement Agreement 

“As per the terms of the settlement agreement signed on October 9, 2025, SWSS will make a settlement payment of USD 2.25 million (approximately ₹19.95 crore) to OEG Inc. (against their claim of about USD 7 million) in two tranches, payable during October and November 2025. This settlement has been accounted for in Q2 FY26, leading to a one-time financial impact of ₹19.95 crore,” the company said.

The management noted that these were largely legacy project-related issues of the U.S. subsidiary. While financially painful in the short term, they described them as necessary steps toward cleaning up the balance sheet and enabling a sharper focus on operational performance.

During the call, one investor raised concerns over corporate guarantees extended by the company to its subsidiaries, amounting to ₹1,700 crore, and asked how the firm’s financials might be affected if these were invoked.

Recoverable Assets 

In response, SWREL’s management clarified that the net assets in its foreign subsidiary FZCO were recoverable, and there was no significant risk associated with the guarantees due to the difference between standalone and consolidated net worth, for which provisions had already been made.

“The amount has already been paid to the customer against the bank guarantee issued by the U.S. subsidiary. Therefore, there is no risk of the Indian entity’s corporate guarantee being invoked,” the management explained.

Another investor asked about other potential legal cases that might impact the firm’s performance. The management sought to allay fears, stating that all ongoing legal matters were disclosed and had minimal expected financial impact.

Impact On Financials 

“All these legal cases have been appropriately disclosed in our financials. Based on legal advice and their current status, we don’t expect any additional amount to be charged to our profit and loss account. In some cases where bank guarantees have been encashed, we are contesting those actions and pursuing our claims,” the management stated.

The company added that most of the ongoing legal cases were covered under indemnity, except for the Conti LLC case, which had led to the recent hit.

One investor, however, criticized the management, pointing out that they had been previously warned of similar risks, suggesting a gap between statements and execution on the ground.

Rising Order Book & Project Pipeline

Despite these challenges, SWREL remains optimistic about its order inflows and project pipeline.

“Our order inflows have picked up significant momentum. We have bagged five new orders since Q1, including our first international order this year and four domestic projects. Our cumulative order inflow this fiscal now stands at approximately ₹3,775 crore, with nearly ₹3,000 crore of that booked since Q1,” said Thakur.

The company is also expanding its EPC operations in Europe and South Africa, and is actively pursuing tenders in Battery Energy Storage Systems (BESS) and hybrid renewable projects.

Being among the early developers in the BESS segment, the management expressed confidence that its experience and technical capabilities would help it perform strongly in the emerging sector.