Shapoorji Pallonji arm, Sterling and Wilson Solar IPO gets subscribed 9% on Day 1 - Should you invest? Find out!
Price band for the Sterling and Wilson Solar issue has been fixed at lower end of Rs 775 per piece and upper end of Rs 780 per piece.
On the first day of its issue, global pure-play, end-to-end solar engineering, procurement and construction (EPC) solutions provider, Sterling and Wilson Solar IPO was subscribed by 9%. The IPO issue received bids up to 21,06,264 equity shares against the total 2,21,77,418 equity shares offered. Investors can subscribe to this IPO until August 08, 2019. Price band for the issue has been fixed at lower end of Rs 775 per piece and upper end of Rs 780 per piece. Through the IPO, the company plans to raise about Rs 3,125 crore. Majority of IPO size some 75% is kept for subscription to qualified institutional buyers (QIB), while 15% for non-institutional investors and remaining 10% for retail investors.
Being a subsidiary of Shapoorji Pallonji, the company is among the largest global solar engineering, procurement and construction (EPC) solutions provider.
Here’s what you must know about the company, as per Axis Capital.
The company provides EPC services primarily for utility-scale solar power projects with a focus on project design and engineering and manage all aspects of project execution from conceptualizing to commissioning. They also provide operations and maintenance (“O&M”) services, including for projects constructed by third-parties.
As of March 31, 2019, they had 205 commissioned and contracted solar power projects with an aggregate capacity of 6,870.12 MWp. Currently they have presence across 26 countries.
As at March 31, 2019 their order book was Rs.3,831.58 crore and received letters of intent of Rs.3,908.16 crore (of which Rs.2,195.93 crore were converted into definitive EPC contracts since March 31, 2019) for solar power projects for which they have won the bid, but have not yet executed definitive EPC contracts.
SWSL is the sole EPC solutions provider for the world’s largest single location solar PV plant of 1,177 MWp in Abu Dhabi, according to CRISIL Research. SWSL is also the largest solar EPC solutions providers in each of India, Africa and Middle East in 2018 with 16.6%, 36.6% and 40.4% market share, respectively, according to IHS Markit.
Chirag Shah and Amit Anwani, Research Analysts at ICICI Securities said, “At the IPO price band of | 775-780, the stock is available at a P/E (considering restated consolidated PAT) multiple of 19.45x-19.57x on FY19 EPS.”
The duo said, “SWSL was the world’s largest solar EPC solutions provider, based on annual installation of utility-scale PV systems of more than five MWp, with a market share of 4.6% in 2018. SWSL was also the largest solar EPC solutions providers in each of India, Africa and Middle East in 2018 with 16.6%, 36.6% and 40.4% market share, respectively. In 2017, it won the bid for the 1,177 MWp solar power project in Abu Dhabi, the world’s largest single location solar PV plant.”
Currently, SWSL has a presence across 26 countries with operations in India, South East Asia, Middle East and North Africa, rest of Africa, Europe, US, Latin America and Australia, which the duo said, “are expected to see steep growth in solar power capacity additions in near future.”
Also, they added, “SWSL operate an asset-light business model, under which its customers are responsible for sourcing and acquiring real estate while SWSL typically lease equipment required for its operations. The asset-light business model generally entails low capex & fixed costs and offers flexibility and scalability to meet its customers’ needs, provide customised solutions and respond quickly to market conditions.”
Hence, the question is should you invest in this IPO?
Motilal Oswal in its research note says, “Based on FY19 consolidated numbers, the issue is priced at a P/E of 19.6x. The company is likely to benefit from i) being the largest global EPC contractor in an industry that is seeing a massive thrust towards renewable energy ii) an asset-light business model, and iii) strong parentage. However, considering the current market environment and absence of past comparable financials, investors can Subscribe only from a Long Term perspective.”
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