Sterling and Wilson Solar Ltd- Information Note

Source: RHP; Note: * Pertaining to the SWPL- Solar EPC Division (derived), ** For the period beginning March 9, 2017 to March 31, 2018, # PE calculated on upper price band

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Key Points

SWSL was the world’s largest solar EPC solutions provider (based on annual installations of utility-scale PV systems of more than five MWp) with a market share of 4.6% in 2018, according to IHS Markit. It 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 (according to IHS Markit). Currently SWSL has presence across 26 countries with operations in India, South East Asia, Middle East and North Africa, rest of Africa, Europe, United States and Latin America and Australia. These markets are expected to see a steep growth in solar power capacity additions over 2018-21E, according to IHS Markit – CAGR of 11.7% in India, 70.6% CAGR in South East Asia, 22.2% CAGR in the Middle East and North Africa, 42.0% CAGR in the rest of Africa, 30.0% CAGR in Europe, 17.4% CAGR in the United States, 5.4% in CAGR Latin America and 8.1% CAGR in Australia. The total cumulative installed solar PV generation capacity is expected to reach ~1,090 GW_DC globally by 2022E (vs. less than just 100 GWDC at the end of 2012). Also, the levelized cost of electricity for solar PV projects decreased sharply between 2012 and 2018 and is expected to continue to decrease until 2030. Given the execution track-record, relationships with customers and suppliers, and innovative and cost-effective engineering project designs, SWSL is well positioned to benefit from this positive trend and continue to expand its operations globally. Revenue from operations outside India accounted for 59.1% and 69.8% of SWSL’s total revenue in FY18 and FY19, respectively.

The company operates under an asset-light business model - customers are responsible for sourcing and acquiring real estate. Company typically leases equipment required for the operations, entailing low capital expenditures and fixed costs, and offers flexibility and scalability to meet the customers’ needs, provide customized solutions and respond quickly to market conditions. Additionally, the company’s operations are supported by (a) its global supply chain, (b) relationships with suppliers and (c) a large design and project execution team in India, which provides cost advantage over competitors and helps the company win bids and repeat orders. For instance, supported by diligence, detailed market studies, cost-effective supply chain and engineering and design capabilities, the company won the bid for the 1,177 MWp solar power plant in Abu Dhabi.

Key Risk

• Top five customers accounted for 76.4% and 53.7% of the company’s revenue in FY18 and FY19 respectively. Loss of a key customer could significantly impact company’s business and future prospects, resulting in material effect on company’s financials.

• The solar power market is still developing and the extent of acceptance of solar power as a form of energy generation remains uncertain. If solar photovoltaic (PV) and related technologies are regarded as unsuitable for widespread adoption, or if demand for solar power does not develop or takes longer to develop than anticipated, company’s revenues may decline and it may be unable to sustain its profitability.