Ind-Ra downgrades Sterling and Wilson Renewable Energy in ‘default’ grade

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India Ratings (Ind-Ra) has downgraded Sterling and Wilson Renewable Energy Ltd’s (SWREL) bank facilities from “BB-” to “D” due to delays in servicing its debt obligations in September 2023 caused by its weakened liquidity position.


The ratings have been removed from “Rating Watch with Negative Implications.”

Ind-Ra highlighted concerns that the company’s operating cash flows would not be adequate to address its upcoming debt obligations in October 2023. This liquidity crunch was exacerbated by the activation of bank guarantees at SWREL’s overseas subsidiary, Sterling and Wilson Solar Solutions Inc.

According to exchange filings Reliance New Energy Ltd as Promoter held 40 per cent and Shapoorji Pallonji & Co Private Limited held 18.55 per cent stake as promoter in the company in June 2023. Kainaz K Daruvala also held 6.85 per cent stake as part of promoter Group.


SWREL had previously conveyed plans to manage its near-term financial commitments through a combination of securing additional debt facilities, collecting project advances, receivables, and invoking a claim under the indemnity agreement. However, these steps were insufficient, resulting in a default, as noted by the rating agency.


Throughout the 12 months leading up to August 2023, Ind-Ra consistently received no-default statements from SWREL, in line with the Securities and Exchange Board of India’s stipulations.


Emphasising the company’s precarious liquidity situation, Ind-Ra mentioned SWREL’s due repayment of Rs 426.1 crore in September 2023, of which Rs 217.7 crore went unpaid due to inadequate funds. The agency also predicts that internal cash flow will not cover the scheduled repayments of Rs 332.3 crore for October 2023.


Ind-Ra predicts that SWREL’s credit profile will remain under strain during the current financial year. On a consolidated basis, credit metrics deteriorated in FY23 as the company took on significant debt to cater to working capital needs and offset operational losses. These losses were primarily due to ongoing international projects from previous years.


The company’s gross debt surged to around Rs 2,000 crore at the end of FY23, compared to Rs 435 crore in FY22. Additionally, during the first quarter of FY24, SWREL issued commercial paper worth Rs 100 crore, bringing its net debt to Rs 2,100 crore as of June 30, 2023.

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