Acuite downgrades short-term rating of Sterling & Wilson Renewable Energy Ltd

Acuité has downgraded its short-term rating to 'ACUITE A1' (read as ACUITE A one) from 'ACUITE A1+' (read as ACUITE A one plus) on the Rs.200.00 Cr. Commercial Paper Programme of Sterling & Wilson Renewable Energy Limited (SWREL; Erstwhile Sterling and & Wilson Solar Limited).

Further, Acuité has also assigned its short-term rating of 'ACUITE A1' (read as ACUITE A one) on the Rs.100.00 Cr. Commercial Paper Programme of Sterling & Wilson Renewable Energy Limited (SWREL; Erstwhile Sterling and & Wilson Solar Limited).

The rating downgrade reflects the continued deterioration in the business risk profile of the company marked by declining operating performance and profitability. The revenues of the company have declined significantly in last couple of years including 9MFY2023. The standalone revenues stood at ~Rs.1300 Cr. during 9MFY2023 against the corresponding 9MFY2022 standalone revenues of ~Rs. 2841 Cr and Rs. 3464 Cr. in FY2022. Further, the company is expected to report revenues of ~Rs.1,600 Cr. on a standalone basis in FY2023 marking a decline of ~54% compared against revenues of FY2022 which also stands significantly lower than Acuité's expectation. The decline in revenues was majorly on account of lower contributions from current EPC projects and lower orderbook execution. Further, the company continues to report operating losses during 9MFY2023 owing to increase in raw material costs and higher fixed overheads. Also, gross margin remains suppressed primarily on account of International EPC projects witnessing increase in labour cost, delays in commencement of certain projects along with increased logistic costs. The EBITDA margins stood at -8.62% for 9MFY2023 against -5.50% during corresponding 9MFY2022 and -3.32% in FY2022. At the same time, debt levels are likely to witness a sharp increase in FY2023 and may remain in the range of Rs.1,900 crore compared to Rs.1,117 crore as on September 30, 2022. Consequently, Acuité estimates the gearing levels to increase to ~1.3 times as on March 31, 2023 compared to 0.24 times as on March 31, 2022. Furthermore, the expected benefits from Reliance Group's acquisition have remained slower-than-anticipated resulting in limited order inflow for solar EPC segment. However, Acuité believes that company will continue to benefit from the established position in the solar industry with strong parentage. Also, the business risk profile of SWREL is expected to turnaround over the medium term with new orders coming in from the domestic market and from planned reduction in overhead costs leading to better profitability levels. However, any further deterioration in the revenues and profitability of the company will remain a key monitorable.

Shares of Sterling And Wilson Solar Limited was last trading in BSE at Rs. 309.00 as compared to the previous close of Rs. 311.45. The total number of shares traded during the day was 39573 in over 1506 trades.

The stock hit an intraday high of Rs. 315.95 and intraday low of 307.00. The net turnover during the day was Rs. 12336299.00.

Source : Equity Bulls

Keywords

SterlingAndWilsonRenewableEnergy INE00M201021 RatingUpdate Downgrade