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    Sterling and Wilson Renewable Energy Q1 FY26 earnings call

    SWSOLAR
    Construction·18 Jul 2025
    Management Summary

    Sterling & Wilson Renewable Energy Limited reported a strong Q1 FY26 with revenue up 93% YoY and significant margin expansion, driven by execution and favorable input costs. Despite muted order inflows in Q1 due to regulatory uncertainties and geopolitical conflicts, the company maintains a robust bid pipeline and expects a strong pickup in order booking in subsequent quarters. Financial health improved with a credit rating upgrade and new banking sanctions, though ongoing legal expenses and customer claims remain watch items.

    Highlights

    6

    • Revenue of ₹1,762 crores, up 93% YoY.

    • Gross margin expanded to 11.7% in Q1 FY26 from 10.1% in FY25.

    • Operational EBITDA increased to ₹123 crores (7% margin) from ₹25 crores in Q1 FY25.

    • Reported EBITDA grew 175% YoY to ₹102 crores (5.8% margin).

    • Secured a 290 MW turnkey project worth ₹813 crores in Gujarat.

    • Credit rating upgraded to BBB+, securing ₹900 crores in new banking sanctions and ₹200 crores in surety bonds.

    Concerns

    5

    • Q1 order inflow was muted due to ALMM II uncertainty, connectivity issues, and ISTS waiver delays.

    • Cross-border conflict caused 40-45 days of productivity loss, impacting Q1 revenue.

    • Ongoing legal expenses of approximately ₹40 crores per year for 1.5-2 years.

    • ₹800 crores in customer claims, not indemnified, posing a potential P&L impact.

    • Subsidiaries in US, Australia, Dubai continue to incur losses due to overheads without projects.

    What Changed1

    vs Q2 FY26

    Risks discussed4 → 7 (+3)

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue₹1,762 Cr+93%YoY
    2. 02Gross Margin11.7%
    3. 03Operational EBITDA₹123 Cr
    4. 04Operational EBITDA Margin7%
    5. 05Reported EBITDA₹102 Cr+1.8%YoY

    Segment breakdown

    Domestic EPC
    10.8% Gross Margin
    International EPC
    12.3% Gross Margin
    O&M
    23% Margin
    List

    Order Book

    high confidence

    Total Value

    ₹ 8,348 crores

    as of 2025-06-30

    quantified

    Inflow this qtr

    ₹ 813 crores

    Composition

    Mix2 geographys
    • Domestic Indian projects88.0%
    • International (Europe and South Africa)12.0%

    Share of order book by geography

    Pipeline

    other

    Bid pipeline exceeding 30 gigawatts, including over 26 gigawatts for India alone.

    Cancellations / Deferrals

    • deferred:Bidding activities pushed out due to various reasons including escalating border conflict, ALMM II requirements, and connectivity issues.
    • deferred:Projects in Rajasthan and Gujarat were disrupted for 40-45 days due to cross-border conflict.
    • deferred:Q1 order inflow was muted due to ALMM II requirements, connectivity issues, and ISTS waiver uncertainty.

    "Order book expected to improve with pickup in domestic and international order inflows, with a significant pipeline for future awards."

    Source:
    Prepared remarks

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Debt

    Net ₹205 crores

    Liquidity

    Undrawn ₹900 crores

    Rating upgrade to BBB+ helped secure fresh sanctions from 3 new banks for INR 900 crores, plus INR 200 crores in surety bonds. Hopeful for additional INR 1,500 crores lines this year. Improved credit rating also helped reduce LC and BG charges.

    Guidance & targets

    7
    CategoryTargetPriority
    Order Inflow
    Order booking growth
    15% to 20%
    		High
    Revenue
    Revenue growth
    15% to 20%
    		High
    Profitability
    Reported EBITDA margin
    5.8%
    		High
    BESS
    BESS revenue contribution
    at least 10%
    		Medium
    BESS
    BESS order book visibility (India)
    3 gigawatts
    		High
    International Orders
    International order target
    $250 million to $300 million
    		High
    Expenses
    Legal expenses
    INR 40 crores
    		High

    What to watch in Q2 FY26

    5

    Order Inflow

    Next quarter (Q2 FY26) and Q3 FY26
    CurrentMuted in Q1 FY26 due to various delays.
    TargetStrong pickup in Q2/Q3 FY26.

    Why it matters

    Essential for achieving full-year order booking guidance and future revenue visibility.

    Awarding activities from both PSU and private IPPs is expected to begin to gain strong traction soon compared to the relatively quiet first quarter that we have seen for us and the market as a whole since bidding activities got pushed out due to various reasons, including escalating border conflict among others.

    Risks & concerns

    7
    RiskSeverity

    ALMM II requirements and domestic module production uncertainty

    Uncertainty around domestic module production capacity and pricing, leading to project delays. — Management acknowledged

    high

    Connectivity issues and ISTS waiver uncertainty

    Delays in infrastructure readiness and uncertainty over ISTS waiver extension impacting project awards. — Management acknowledged

    medium

    Cross-border conflict impact on project execution

    40-45 days of productivity loss in Q1 FY26 due to project evacuation in Rajasthan and Gujarat. — Management acknowledged

    high

    High competitive intensity in solar EPC market

    Acknowledged 'competitive spree' with many players entering, potentially impacting margins and order wins. — Management acknowledged

    medium

    Customer claims (INR 800 crores) not indemnified

    INR 800 crores in claims that are not indemnified, posing a potential P&L impact if the outcome is unfavorable. — Analyst acknowledged

    high

    Ongoing legal expenses

    Approximately INR 40 crores per year for 1.5-2 years due to ongoing legal cases. — Management acknowledged

    medium

    Losses in international subsidiaries without active projects

    Subsidiaries in US, Australia, Dubai incurring losses due to overheads without active projects. — Analyst acknowledged

    low

    Q&A highlights

    8

    “So primarily the order has been pushed from the last few quarters to Q1, to maybe Q2 also, mainly because of few reasons, one prominently could be the ALMM II requirements for the cell and industry just watching to see that how the domestic solar modules could be produced and what price and all. So all of the developers have applied for the relief on the time lines for the projects. That is one of the reasons.”

    Clarifies the specific factors (ALMM II, connectivity, ISTS waiver) that led to lower Q1 order inflows and reiterates confidence in full-year order booking growth.

    asked by Kunal Shah

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Sterling & Wilson Renewable Energy Limited reported a robust Q1 FY26, with revenue surging 93% year-on-year to INR 1,762 crores. This growth was accompanied by a significant improvement in consolidated gross margin to 11.7% from 10.1% in FY25, aided by softening input costs. Operational EBITDA reached INR 123 crores (7% margin), a substantial increase from INR 25 crores in Q1 FY25, while reported EBITDA grew 175% YoY to INR 102 crores (5.8% margin), leading to a PAT of INR 39 crores.

    02

    Order Book and Pipeline Dynamics

    The unexecuted order book stood at INR 8,348 crores as of June 2025, with over 88% comprising domestic Indian projects. The company secured a new 290 MW turnkey project in Gujarat worth INR 813 crores from a leading PSU during the quarter. The bid pipeline remains strong, exceeding 30 gigawatts globally, with over 26 gigawatts in India alone, and management expects a significant pickup in order inflows in Q2 and Q3 FY26.

    03

    Industry Outlook and BESS Focus

    The domestic solar EPC market is poised for a strong year, with awarding activities expected to gain traction from PSU and private IPPs. India's clean energy capacity has grown remarkably, and the company is strategically targeting BESS projects, with 3 gigawatts of battery storage visibility for the coming financial year. Management expects BESS to contribute at least 10% to revenue streams going forward⏳, noting that BESS projects have 15-20% less execution timelines than solar projects with similar margins.

    04

    Financial Health and Liquidity

    The company's financial position strengthened with a two-notch credit rating upgrade to BBB+, which facilitated fresh sanctions of INR 900 crores from new banks and INR 200 crores in surety bonds. Management is hopeful of securing an additional INR 1,500 crores in credit lines this year, and the improved rating has also helped reduce LC and BG charges. Gross borrowings declined due to IREDA loan repayment, though net debt increased by INR 205 crores due to a Bank of Maharashtra disbursement.

    05

    Operational Challenges and Mitigations

    Q1 order inflows were impacted by delays stemming from ALMM II requirements, connectivity issues, and uncertainty surrounding ISTS waivers. Additionally, cross-border conflicts led to a 40-45 day productivity loss in projects in Rajasthan and Gujarat, affecting Q1 revenue generation. The company is actively managing these challenges, including renegotiating module prices to leverage market conditions and seeking time extensions for affected projects.

    06

    Guidance and Future Outlook

    Sterling & Wilson aims for 15-20% year-on-year growth in both order booking and revenue for the current financial year. The company expects to maintain its reported EBITDA margin in the 5.8% range going forward⏳. For international markets, a target of $250-300 million in new orders is set for the financial year, primarily from European and African markets. However, the company anticipates ongoing legal expenses of approximately INR 40 crores per year for the next 1.5-2 years.

    This is an AI-generated summary of a publicly available earnings call transcript.