India Ratings Downgrades Sterling and Wilson Solar to 'IND A', Maintains RWN

India Ratings and Research (Ind-Ra) has downgraded Sterling and Wilson Solar Limited's (SWSL) Long-Term Issuer Rating to 'INDA' from 'INDAA-' while maintaining it on Rating Watch Negative (RWN).

Ind-Ra continues to analyse SWSL on a standalone basis, without factoring in parent support. However, given that Shapoorji Pallonji & CompanyPrivate Limited (SPCPL) continues to be the majorityshareholder of SWSL, the latter's rating would remain linked to the former's credit profile, and any further deterioration in the credit profile of SPCPL will be negative for SWSL's ratings.

The downgrade reflects Ind-Ra's view that SWSL's operating performance in FY21 is likely to be significantlyweaker than the agency's earlier expectations, and the tightened financial flexibilityof SPCPL, as reflected in the latter's application for Reserve Bank of India-prescribed COVID-19-related debt restructuring.

The RWN reflects the further uncertaintywith regards to the credit profile of SPCPL, given the pending OTR approval bySPCPL's lenders, postwhich the timelines and covenants for restructuring will be known. This is likelyto result in delayed deleveraging for SWSL, since it has provided inter-companydeposits (ICDs) to one of its promoters group entities. SWSL expects the ICDs to be repaid fullybyend-1HFY22, against the earlier expected timeline of end-1HFY21.

The promoters of SWSL are in the process of creating securities worth INR12,000 million against the outstanding ICDs. Furthermore, the interest that SWSL would receive from its promoters would be 4% higher than the rate that it is being charged against the outstanding term debt that it has availed to fund these ICDs.

Source : Equity Bulls

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