Sterling and Wilson Renewable Energy Limited

Sterling and Wilson Renewable Energy Limited reported Q1 FY27 revenue of INR 1,590 crores, a decline both sequentially and year-on-year. This was primarily attributed to project delays and slower execution in the international EPC segment. Despite the revenue dip, the company's PAT grew 36% YoY to INR 53 crores, aided by lower effective taxation rates. Operational EBITDA stood at INR 78 crores, with a margin of 4.9%, while reported EBITDA was INR 96 crores, positively impacted by forex gains.

The company achieved a significant milestone with its Unexecuted Order Value (UOV) exceeding INR 13,000 crores, a historical high. New order inflows for the quarter amounted to INR 6,400 crores, including both PSU and IPP projects. A substantial portion of the current UOV, comprising 6 turnkey projects (3 domestic, 3 international) valued at INR 9,000 crores, is yet to commence execution. The bidding pipeline remains robust, estimated at INR 45,000-50,000 crores, including 25 GW of utility-scale and 35 GWh of BESS projects.

A major highlight of the quarter was the award of a landmark 1,000 MW AC solar PV plant integrated with a 600 MWh battery energy storage system in Minya Governorate, Egypt. This USD 560 million project, secured through a 50-50 joint venture with Hassan Allam Construction, marks the company's third gigawatt-scale order win in nine months. Execution for this project is expected to commence after NTP in September 2026, contributing to revenue from Q4 FY27.

The Operations and Maintenance (O&M) segment demonstrated strong performance, with revenue growing approximately 40% year-on-year. The company now manages a record 18.3 gigawatts of peak capacities under operations. Management anticipates full contribution from this portfolio starting Q3 FY27, expecting O&M gross margins to stabilize at around 20%. The O&M business is projected to generate INR 400-450 crores in revenue for the current fiscal year, up from INR 268 crores last year.

Net debt levels remained largely stable during the quarter, with gross borrowings declining by INR 130 crores due to scheduled term loan repayments. The net working capital stood at negative INR 260 crores, an improvement from negative INR 329 crores in the previous quarter. The company expects further working capital cycle improvement from collections on new large projects and has secured fresh credit lines totaling over INR 3,200 crores to support growth.

The domestic solar EPC market experienced a slowdown for the second consecutive quarter due to geopolitical tensions, volatile commodity prices, and high module prices. However, the company anticipates ordering activity to pick up from Q2 FY27. The battery energy storage system (BESS) market is growing exponentially, with an estimated opportunity of 35-40 GW in the next 2-3 years. The company is cautiously evaluating sourcing strategies and partnerships in the nascent Indian BESS market.

Sterling and Wilson's engagement with the Reliance Group continues to deepen, particularly regarding the development of a large integrated renewable energy hub in Kutch, Gujarat. The company is working closely with Reliance on technical configuration and execution readiness, expecting to secure a significant share of this initiative. Management emphasized a philosophy of disciplined project selection, focusing on margin-accretive projects and mitigating risks through back-to-back pricing arrangements and avoiding mandates with uncontrollable risks.

Q1 revenue was impacted by delays in NTP dates and Letters of Award for new projects. Management acknowledged the challenge of ramping up execution in H2 FY27 to meet full-year guidance but expressed confidence based on past performance. For DCR category projects, prices have been locked, mitigating module price increase risks. The company is also managing significant arbitration claims, with major US cases expected to take 2-3 years for resolution, while INR 120-130 crores from indemnity are anticipated in the current year.