Sterling and Wilson Renewable Energy Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

2
Ajit Pratap Singh, C.K. Thakur

Analysts

10
Adwait Javkar, Anirudh Singhi, Balasubramanian, Faizal Hawa, Jayesh Shroff, Kenil Mehta, Kunal Shah, Shrish Vaze, Sucrit Patil, Yash Jhurani

Financials & KPIs

Geographic & Segment Commentary

• India EPC: Market sluggish for a second consecutive quarter due to geographical tensions, volatile commodity prices and high domestic module prices deferring new awards. Only ~₹6,400 crores of orders concluded in Q1 vs ~₹20,000 crores expected, as new entrants bid aggressively; company remained patient for margin-accretive orders. Ordering activity expected to pick up from Q2, with visibility of ₹45,000-50,000 crores of awards (25 GW utility-scale solar + 35 GWh BESS).

• International EPC: Successfully completed 4 projects in South Africa, Spain and Italy within projected margins. Won 3 new projects — 2 in South Africa and 1 in Egypt (West Minya, 1,000 MW AC + 600 MWh BESS, ~USD560 million, 50-50 JV with Hassan Allam Construction). This marked the third gigawatt-scale order win in 9 months. All international projects protected via back-to-back pricing arrangements; execution on new projects to commence this quarter.

• O&M: Record 18.3 GWp under operations, up from 13.5 GWp, driven by ~5.8 GWp of own EPC commissioning in FY26 and third-party wins including a single 1.2 GWp order. Full portfolio contribution from Q3 FY27; FY27 revenue guided at ₹400-450 crores at ~20% gross margin with low overheads.

• BESS: Market increasing exponentially with standalone and hybrid solar+BESS projects being awarded. Current BESS order has battery supplied by client free of cost, so no import duty exposure. Management evaluating Make-in-India battery sourcing partners carefully; BESS BoS margins expected similar to PV at ~10%.

Company-Specific & Strategic Commentary

• Egypt JV & Gigawatt-scale Wins: Third gigawatt-scale order in 9 months through 50-50 JV with Hassan Allam Construction; full EPC scope including PV, BESS, grid connection and transmission. NTP expected September 2026 with revenue contribution from Q4 FY27; 13-15 months execution post-NTP.

• Reliance Group Engagement: Deepening — Reliance outlined plans for a 5.5 lakh-acre integrated renewable hub in Kutch (40+ billion units annually, RTC power at GW scale); first phase of 40 GWh battery Gigafactory on track for commissioning this year. Company working on technical configuration and execution readiness; contract composition (supply vs EPC scope) yet to be finalized, to be transacted at arm's length.

• Bidding Discipline & Risk Framework: Deliberately selective — avoiding mandates with land, right-of-way or resource risk outside control; back-to-back pricing with supply chain; negative working capital model maintained throughout.

• Floating Solar: Executing India's largest floating solar plant with NTPC-DVC JV at Tilaiya, Jharkhand; additional large floating tenders upcoming and company well-positioned.

• Credit & Lender Diversification: >₹3,200 crores of fresh credit lines obtained cumulatively; local bank financing secured for South African projects; term loans largely repaid over current and next year, moving toward near-deleveraged fund-based position.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Revenue Decline & FY27 Guidance

• Question: Revenue declined ~10% YoY, missing the ₹2,000-2,500 crore quarterly run-rate target; guidance revised from 15% to 10-15% — is execution missing? (Kunal Shah, DAM Capital)
• Answer:
  • Decline due to delayed LOA/NTP for orders announced L1 in Q3/Q4 FY26; existing UOV projects were at advanced stage with supplies booked in prior quarters (C.K. Thakur)
  • Q2 may also see slight slowness, but H2 will be "definitely bright" as new orders commence execution (C.K. Thakur)

Egypt Project Lifecycle & Credit Line Usage

• Question: Execution timeline for the Egypt order; will company-specific banking limits be used for Egypt, Adani and parent orders? (Kunal Shah, DAM Capital)
• Answer:
  • 13-15 months execution post-NTP with 2-month LNTP period; NTP expected September 2026, revenue from Q4 FY27 (C.K. Thakur)
  • Egypt order may use part existing and part new project-specific credit lines; Adani orders need no credit lines as supplies are primarily from their side; parent terms not yet closed (Ajit Pratap Singh)

ALMM/DCR Module Price Exposure

• Question: How much of ₹13,000 crores UOV is exposed to ALMM; with domestic modules at 130-160% premium and 6-month certification backlog, will execution slip? (Yash Jhurani, Qode Advisors)
• Answer:
  • Coal India orders fall under DCR category but prices were locked at bid submission; no impact anticipated from module price surge (C.K. Thakur)
  • DCR cost shock will not break project IRRs; margins to remain within 8-10% based on order mix (C.K. Thakur)

BESS Duty & Import Exposure

• Question: How exposed are BESS margins to duty charges on imported cells? (Yash Jhurani, Qode Advisors)
• Answer: Current BESS project has battery supplied by client free of cost — zero exposure to regulatory changes; future turnkey BESS bids will factor current market pricing for kWh (C.K. Thakur)

Q2 Outlook, Floating Solar & Ordering Pipeline

• Question: Any overseas floating solar orders coming up; will Q2 revenue remain slow; what was the Q1 bid hit rate? (Faizal Hawa, HG Hawa & Company)
• Answer:
  • Executing India's largest floating plant with NTPC-DVC JV at Tilaiya; large floating tenders upcoming and company well-positioned (C.K. Thakur)
  • Q2 revenue in similar range to Q1 (~₹1,590 crores); Q3/Q4 significantly higher as new orders enter execution (C.K. Thakur)
  • Only ₹6,400 crores of orders concluded in Q1 vs ~₹20,000 crores expected; new entrants turned aggressive, company stayed patient; ₹45,000-50,000 crores pipeline visible (25 GW solar + 35 GWh BESS) (C.K. Thakur)

H2 Execution Capacity & Margin Trajectory

• Question: H2 requires ~₹2,600-3,000 crores quarterly plus Reliance projects — will execution capacity be a bottleneck? (Jayesh Shroff, Cask Capital)
• Answer:
  • Team fully geared; ~10.5 GW under execution vs ~3 GW earlier; Q4 FY25 demonstrated >₹2,500 crores quarterly execution; "we have no option, we have to perform" (C.K. Thakur, Ajit Pratap Singh)
  • 8-10% gross margin guidance reflects turnkey vs BoS mix; overheads stable in absolute terms, so operating leverage plays out if margins hold (C.K. Thakur, Ajit Pratap Singh)

Claims, Arbitration & Indemnity Coverage

• Question: Do project delays increase bank guarantee invocation or termination risk; when will ~₹1,800 crores claims be resolved; how much is indemnified? (Adwait Javkar, EquiPoise Capital; Shrish Vaze, Alembic Pharmaceuticals)
• Answer:
  • No BG invocation risk — contracts for delayed orders haven't started; project timelines begin from LOA (C.K. Thakur)
  • US claims in court, conservatively 2-3 years; other claims via settlement or arbitration sooner; ~₹800 crores cash-out covered under indemnity with ₹120-130 crores expected realization in FY27; ₹110 crores LD covered in Australia arbitration; strong legal cases on remaining (Ajit Pratap Singh)

O&M Portfolio Expansion & Revenue Guidance

• Question: Why did O&M capacity jump from 13.5 GW to 18.3 GW in one quarter; can margins reach 18-25%? (Kenil Mehta, Omkara Capital)
• Answer:
  • Additions from own EPC commissioning (~5.8 GWp completed in FY26) plus third-party orders including a single 1.2 GWp win; utility-scale market additions of 30-35 GW expected this year (C.K. Thakur)
  • FY27 O&M revenue guided at ₹400-450 crores vs ₹268 crores in FY26; margins stabilizing at ~20% (Ajit Pratap Singh)

Working Capital & Funding Strategy

• Question: With rising working capital intensity and volatile financing costs, what frameworks sustain profits and fund global expansion? (Sucrit Patil, Eyesight Fintrade)
• Answer:
  • Diversified lender base added in India and globally — local bank lines taken in South Africa; lead bank increased limits; term loans largely repaid over next 2 years, moving near-deleveraged on fund-based requirements (Ajit Pratap Singh)
  • Negative working capital cycle continues via customer advances and LC-based supplier payments (90-180 days) (Ajit Pratap Singh)

Reliance Engagement & Order Composition

• Question: Will Reliance LOAs be faster; will raw materials be supplied by Reliance New Energy only? (Kenil Mehta, Omkara Capital)
• Answer:
  • Execution plan will be very intensive with lower timelines than market; company gearing up accordingly (C.K. Thakur)
  • Contract composition yet to be finalized — some supply in our scope, majorly from Reliance; all transactions between listed entities will be at arm's length (C.K. Thakur, Ajit Pratap Singh)

Key Takeaway

Q1 FY27 was a transitional quarter for Sterling and Wilson Renewable Energy: revenue declined to ₹1,590 crores on delayed LOAs and fag-end completion of four international projects, but unexecuted order value hit a record ₹13,000+ crores, anchored by the USD560 million West Minya Egypt order (1,000 MW AC + 600 MWh BESS) — the company's third gigawatt-scale win in nine months. PAT grew 36% YoY to ₹53 crores on 9.9% gross margins. Management retained FY27 revenue growth guidance of 10-15% (ex-Reliance), with Q2 expected flat and H2 ramping sharply as ~₹9,000 crores of uncommenced orders commence execution. O&M is a key growth engine with FY27 revenue guided at ₹400-450 crores from a record 18.3 GWp portfolio. Strategy remains disciplined — selective margin-accretive bidding, back-to-back pricing, negative working capital — while Reliance engagement deepens on the Kutch hub. Watch items: H2 execution concentration (₹2,500-3,000 crores/quarter), ALMM/DCR module price pressure, and the ~₹1,800 crores litigation overhang.