After announcing the $771 million acquisition of REC Solar from ChemChina, Reliance Industries is also buying Sterling and Wilson Solar from its promoters, making a big splash towards its renewable energy foray, the company said on Sunday late evening.
Shapoorji Pallonji & Co. Pvt. Ltd (SPCPL) and Khurshed Yazdi Daruvala, promoter-shareholders of Sterling and Wilson Solar, cumulatively own 69.36 per cent of the company, with the public owning the rest. The promoters had raised Rs 2,850 crore from the public through an IPO in 2019, but subsequently failed to repay the loans of the company a year later, though it was promised in the prospectus. This created a future among shareholders who demanded an exit for their investments citing a breach of trust.
Reliance New Energy Solar Ltd (RNEL), a wholly-owned arm of Reliance Industries will be issued fresh shares of Sterling and Wilson as a preferential allotment of 2.93 crore shares at Rs 375/share, representing 15.46% of the company’s expanded equity base. Another 9.70% of the company will be acquired by RNESL from Shapoorji Pallonji & Co. Pvt. Ltd at the same price. It will also trigger an open offer for an additional 25.7% of the company as per Indian takeover regulations and if fully successful, RNESL will hold 40% stake involving a total payout of Rs 3630 crore.
The market capitalisation of Sterling and Wilson Solar on Friday was Rs 6,972.45 crore.
The company had a consolidated net loss of Rs 76.02 crore against a net profit of Rs 17.22 crore in the quarter that ended on June 30, 2021.
The stock however has zoomed 60% in the last 3 months in anticipation of a deal. On September 29 this year, SP Group and SWSL repaid an outstanding debt of Rs. 2,563 crore, further paving the way for a transaction.
ET in its edition dated September 8th was the first to report that Sterling and Wilson’s promoters are looking at divesting their stake and might even give up control and was in talks with players like Adani Group, RIL, Brookfield among others.
Sterling and Wilson is one of the world’s leading EPC (engineering, procurement, construction) players, and has executed projects worth 11 GW across the globe though in the recent past been overtaken by Tata Power’s EPC division as the SP’s Group debt overhang slowed its growth prospects forcing the Mistry family to sell down family jewels like Eureka Forbes. In March, the Reserve Bank of India-appointed KV Kamath committee approved a one-time restructuring package for 150-year-old SP Group’s Rs 10,900 crore debt under the Covid-19 relief framework. The sell-offs are part of that exercise.
As on August 14, 2021, the company’s unexecuted order book stood at Rs 8,731 crore, which is executable over the period of next 12 to 15 months.
With the two transactions, Reliance will become among the top players in two crucial areas of solar renewable projects: solar cell manufacturing and EPC, a time when the dominance of Chinese manufacturers have come under heightened global scrutiny. It also gives Reliance access to cutting-edge technology and global manufacturing capabilities as well as a domestic base that will help the group with a strong foundation.
It also has invested in US-based battery storage technology company Ambri Inc, along with Bill Gates and Paulson and Co.
These deals come at the heels of Ambani’s announcements for ambitious green energy plans with the setting up of the Dhirubhai Ambani Green Energy Giga Complex on 5,000 acres in Jamnagar, at the company’s 44th annual general meeting in June. With a $10-billion investment, the company plans four giga factories — an integrated solar PV plant, advanced energy storage battery manufacturing unit, green hydrogen, and fuel cell facility.