Acuité reaffirms short term rating of Sterling & Wilson Solar Limited

Acuité has reaffirmed the short-term rating to 'ACUITE A1+' (read as ACUITE A one plus) on the Rs.200.00 crore Commercial Paper Programme of Sterling & Wilson Solar Limited (SWSL).

Further, Acuité has withdrawn the short-term rating to 'ACUITE A1+' (read as ACUITE A one plus) on the Rs.200.00 crore Commercial Paper Programme of Sterling & Wilson Solar Limited (SWSL). This rating withdrawal is in accordance with the Acuité's policy on withdrawal of rating. The rating is being withdrawn at the company's request and based on confirmations received as per Acuité's policy.

The reaffirmation of rating is primarily on account of healthy order book position which is expected to generate healthy cash flows in near to medium term, expected improvement in liquidity on account of extension in repayment and expectation of inflow of ICDs from Group Company would further strengthen the liquidity position of the company.

On account of the outbreak of COVID-19 crisis, the operations of SWSL has been impacted in India, Kenya and Jordan. This has temporarily impacted the cash flows of SWSL; however, with unexecuted order book position of over Rs.10,000 crore is likely to generate healthy cash flows in near term. Additionally, as per the last board meeting announcement on the extension of timelines with regards to the settlement of loans and advances extended to its group companies. As per the revision extension received, the loans and advances to the tune of ~Rs.1126 Cr. were to be settled by September 30, 2020. However, as on September 30, 2020 only Rs.103 Cr. has been settled. Acuité has taken note of Cash and cash equivalent of Rs.184 Cr. as on 30 June, 2020. The company does not have any Commercial Paper outstanding as on 28 September 2020 and does not intend to raise CP over Rs.200 Cr. in the near to medium term.

The shortfall in the settlement is likely to impact the liquidity profile of SWSL. On account of the outbreak of COVID - 19 led to lockdowns across the world has impacted the domestic as well as certain overseas operations of SWSL (as mentioned above). The operating revenues for Q1FY2021 stood at Rs. 1068 Cr. as against Rs.1245 Cr. in Q1FY2020, however, the profitability has significantly impacted with operating margin at 1.55 per cent for Q1FY2021 as against 5.30 per cent in Q1FY2020. Shapoorji Pallonji Group (SP Group) has announced its willingness to divest its ~18% stake in Tata Sons, the timelines and closure of the transaction depend on a successful resolution of the matter with Tata Group. Acuité believes on receipt of these funds and settlement of ICDs, the liquidity position of SWSL will further strengthen.

Source : Equity Bulls

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