We stand by Sterling and Wilson: Shapoor Mistry

MUMBAI: The promoters of Sterling and Wilson Solar stand by the company’s repayment commitments and a delay does not mean dishonouring that pledge, said Shapoorji Pallonji Group chairman Shapoor Mistry. Sterling and Wilson is jointly promoted by Shapoorji Pallonji Co Ltd (SPCPL) and Khurshed Daruvala.
“We stand by the company and each other as promoters,” Mistry told ET in a rare media interview. “The partnership between Mistry family and Daruvala family goes back three generations. We are not moving away from our commitment to honour in full all the obligations towards the company.”

The promoters were scheduled to pay Rs 2,563 crore to Sterling and Wilson Solar by November 18. Of this, Rs 2,335 crore was the principal and the remaining was interest. The promoters had repaid Rs 250 crore and wrote to Sterling and Wilson’s board on November 14 seeking a revised repayment schedule citing “significant and rapid deterioration in credit markets.”

“We want to reiterate that the request for an extension of time for the repayment of the intercompany dues does not in any way dilute our intent to honour these payments,” Mistry said.

Liquidity Situation in Credit Markets
“The liquidity situation in the credit markets have been one of the harshest in recent decades, although the recent interventions by the government have started showing signs of improvement. The group, like most corporates, witnessed a very tight credit environment but the strength of the group would see it navigate these challenging times,” he said.

Daruvala, chairman and co-promoter of Sterling and Wilson, said the intrinsic value of the company continues to be strong as it enjoys a leadership position in key global markets, a significantly improved order book and high return on capital employed.

“The current order book is over Rs 12,000 crore, which is nearly triple what it was at the same time last year,” he told ET. “The company also continues to enjoy industry leading operating margins with a low capital employed.”

Daruvala said when the company filed its draft red herring prospectus (DRHP) for the offer for sale (OFS), the envisaged issue size had been Rs 4,500 crore and one of the key objects was to provide liquidity to the promoters. This would have been sufficient to do that and manage the repayment of the intercompany deposits and hence, originally, there was no timeline mentioned for the repayment as it was expected to be made immediately after listing.

“However, the OFS size had to be curtailed to Rs 3,125 crore due to unfavourable capital market conditions,” he said. “Considering the reduced issue size, we indicated a timeline of 90 days for the repayment of intercompany dues, as the reduced issue proceeds would have been primarily used for group liquidity requirements as disclosed in the red herring prospectus.”

The 154-year-old SP Group operates in diverse industries ranging from construction to real estate and oil and gas and generally keeps a low profile. It owns a little over 18% in Tata Sons and was embroiled in the tussle that saw Cyrus Mistry, Shapoor Mistry’s brother, ousted as chairman of the holding company in 2016.

“The construction sector tends to operate in lumpy cycles,” Mistry said. “Our order book position is extremely strong. Our group revenue has grown by over 20% CAGR (compounded annual growth rate) over the last five years to reach Rs 55,000 crore today. The group ebitda (earnings before interest, tax, depreciation and amortisation) also increased significantly to Rs 5,000 crore in the last year.”

Mistry said the SP Group will be strengthening its balance sheet by monetising some assets and has received offers for solar projects, road and overseas infrastructure assets. “We are in an advanced stage to consummate these transactions,” he said.

Corporate observers had criticised the Sterling and Wilson management, calling the change in the repayment terms a breach of trust and a case for the regulator to step in for not fulfilling the objective or purpose of the prospectus. However, there is no requirement to disclose the utilisation of proceeds in an OFS, said Ayush Agarwala, partner, K Law.

“Accordingly, there is no requirement of approval of shareholders in such cases and, therefore, there is no violation of any Sebi (Securities and Exchange Board of India) guidelines and regulations,” he said.