Sterling and Wilson Renewable Energy Ltd (SWSOLAR) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Ajeet Pratap Singh (Sterling and Wilson Renewable Energy Ltd): The company reported an operating revenue of 1,029 crores in Q2 FY25 compared to 759 crores in Q2 FY24. In H1 FY25, company reported an operating revenue of 1,944 crores compared to 1,274 crores in H1 FY24, recording an exceptional growth of 53%. Gross margins for Q2 FY25 stood at 10.9% and in H1 FY25 stood at 11.2%. The company reported a positive EBITDA of 13 crores in Q2 FY25 and 32 crores in H1 FY25. Positive PAT of 9 crores in Q2 FY25 and 13 crores in H1 FY25. Consolidated net debt stood at 227 crores as of September 2024, compared to 116 crores as of June 2024 and negative 97 crores as of March 2024. In Q2 FY25, order inflows were 2,046 crores and in H1 FY25 it was 4,216 crores, which is up by 59% year-on-year. The unexecuted order book as of September 2024 stands at a record 10,549 crores, out of which 84% are for domestic EPC projects. This is the highest unexecuted order book in the history of the company. In line with the strategy of de-risking and enhancing cash flows, out of the total order book of 10,549 crores, 64% of the orders are with module and BESS equipment as client's scope. We are continuously seeing strong order inflows in H1 FY25 and based on that, our confident of achieving our revenue and profitability guidance for FY25 and FY26. Our current domestic and international pipeline of high probability solar EPC and BESS projects is also strong and will help in expanding our order book further. With this, I now open the floor for question-and-answer session. Thank you.
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Moderator: Ladies and gentlemen, good day, and welcome to Sterling and Wilson Renewable Energy Ltd Q2 FY '27 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. Today on this call, we have Mr. C. K. Thakur, Global CEO; Mr. Ajeet Pratap Singh, CFO, from Sterling and Wilson Renewable Energy Ltd; and SGA, who are their IR partners. I now hand the conference over to Mr. C. K. Thakur. Thank you, and over to you, Mr. Thakur.
C. K. Thakur (Sterling and Wilson Renewable Energy Ltd): Thank you. Good morning, everyone. Thank you for joining us to discuss the results for the second quarter and first half of fiscal 2027. As we flagged on our last call, the first half of this year turned into a transition period. Our ongoing projects are in their final stages, while eight new projects, four in India and four overseas, were moving through LOA and notice to proceed. I'll begin with where the industry stands today, because it shapes both our opportunities and our discipline. I'll then cover our operating performance and outlook, and Ajeet, our CFO, will take you through the financial updates. So, I'll just touch upon the industry overview. India's renewable energy journey continues at an extraordinary pace. Renewable and large hydro capacities stood at about 308 gigawatts as of September '26, roughly 53% of the country's total generating capacity. Solar remains the engine of this growth. Installed solar capacity has grown from under 3 gigawatts in 2014 to about 171 gigawatt today. Calendar 2026 is on track to be a strong year for solar capacity addition in India.
C. K. Thakur (Sterling and Wilson Renewable Energy Ltd): 8% more than a year earlier, and full-year additions are expected to be in the range of 50 GW DC, ahead of the record 49 GW set in 2025. That said, the near term has been more challenging. Two factors slowed new utility-scale awards in the first half of the year. A third factor, competition, has influenced how we bid. First, the shift to domestic solar cells. Since June 2026, projects must use modules made with Indian cells as per ALMM II. India has over 200 GW of module capacity, but only about 35 GW of cell capacity. So compliant modules are scarce and costly, they raise project costs by around 15% to 17%. As a result, developers are reworking project economics and tariffs, and many have delayed EPC awards until prices and economics settle. We see this as a temporary phase. Cell capacity is expected to reach about 100 GW by December 2027, which should ease prices and restore award activities. In the long run, it will give India a stronger and more secure supply chain. Second, delay in power purchase agreements and transmission constraints. About 40 to 50 GW of awarded renewables capacity is still awaiting for signed power purchase agreements. Solar output is also being curtailed at times in Rajasthan and in some parts of western India because of grid limitations. As a result, project pipelines in Rajasthan and Gujarat have been pushed out of several quarters. Third, the competitive landscapes. Competitive landscapes has affected how we win the projects. Entry barriers in reverse auctions are low, and some new players have bid at prices we believe are tough to maintain margins and may not be sustainable. We have been very much cautious and selective in such bids, and hence our own order wins in domestic markets have been lower. We saw similar cycles in 2011 and around 2015-16, and disciplined, experienced players came out stronger each time. The government is now acting firmly on some of the issues related to transmission bottleneck. On 30th September 2026, the Cabinet approved Green Energy Corridor Phase III with an outlay of around 1.86 lakh crore. This includes about 1.36 lakh crore from state transmission networks, with central support of around 54,000 crores. It aims to connect up to 135 GW of renewable energy to the grid by FY '33. In addition, on 6th October 2026, the Ministry of Power issued new rules to pay landowners market rates for the land used by the transmission lines. This should reduce disputes and speed up construction. These measures will take time to deliver, but they directly address the transmission bottleneck that is holding back PPAs and new awards. Of course, the loose side of this circular has to be seen once the high land cost will come into play. Battery energy storage systems. Battery storage in India has moved from pilot project to large-scale deployment. India added about 8.2 gigawatt hours of battery storage in the first half of 2026, compared with less than 100 megawatt hours a year earlier. Almost all of this came from large stand stand-alone projects. Rajasthan and Gujarat, two of our core markets, account for over half of installed capacities. The outlook is also robust. Crisil expects 45 to 50 gigawatt hours to be commissioned in FY '27 and FY '28 alone. Projects with storage made up nearly 40% of renewable capacity auctioned in FY '26, up from about 5% earlier. The Central Electricity Authority expects 236 gigawatt hours by FY '32. The government also plans to require storage for new solar and wind projects from July 2027. We expect most large
C. K. Thakur (Sterling and Wilson Renewable Energy Ltd): solar tenders to include storage going forward. We are actively monitoring the BESS opportunities and are selective in bidding new BESS projects. Battery prices have risen in 2026 after years of decline. The domestic battery supply chain is still developing, and customers increasingly expect long performance warranties from EPC contractors. Now, coming to operating performance for Q2 financial year 2027. Revenue was Rs. 1,527 crores in Q2 and Rs. 3,118 crores in the first half, about 11% lower than H1 FY '26. This decline is primarily from our international businesses. International revenue was Rs. 165 crores in the first half compared with Rs. 929 crores last year. Our four older international projects in South Africa, Spain, and Italy were completed and the new ones are yet to start. Meanwhile, our domestic businesses grew. Domestic EPC revenue in H1 FY '27 rose about 13% to Rs. 2,768 crores, and O&M revenue in H1 rose 48% to Rs. 183 crores. The lower revenue, therefore, reflects the timing of international project execution. Eight projects in our order book, four in India and four overseas, are yet to start. Since contract timelines start only from LOA to NTP, these delays do not expose us to potential, to penalties, or bank guarantee risks. As of 30th September 2026, our order book stood at 12,481 crores, about 34% higher than a year ago and up from 11,813 crores in March 2026, 2027. The order book is diversified and well-balanced, with about 56% from India, that is Rs. 6,943 crores, and 44% from international market, that is Rs. 5,538 crores. We won orders worth Rs. 3,626 crores in the first half, nearly 90% of them international. This was a deliberate choice. When domestic awards slowed down and pricing became aggressive, we avoided low-margin bids and focused on international markets, where we are winning at healthy margins. However, in international market, we are very selective in terms of geography and are actively pursuing only in certain countries where we have a strong track record, execution bandwidth, and right partners. Q2 financial year 2027 order wins and pipelines. In Q2, we won two orders worth over Rs. 985 crores including taxes as announced in September 2026. We won a 534 megawatt project in Rajasthan, it's a balance of systems order from leading Indian IPP who is a new customer for us. We won a 616 megawatt project in South Africa. It constitutes two battery storage projects of 308 megawatt each on a turnkey basis from a lead, from from a leading Middle East base developers and repeat customer. This is our second largest utility-scale battery projects. We have received the LOA. These wins add to the contract we signed in June 2026 for the West Nile projects in Egypt. This is a 1,000 megawatt AC solar plant with 600 megawatt-hours of storage, worth about US dollar 560 million, which will execute through our 50-50 joint venture with Hassan Allam Construction. We expect it to start contributing to revenue this year. Our work orders, our work under the 5-year framework agreement with Adani Groups also continues as planned. Our floating solar project at Tilaiya in Jharkhand, one of the largest in India for NTPC-DVC joint venture is nearing completion. Power evacuation will begin once dedicated transmission line is ready. This experience positions us well for upcoming floating solar tenders from NTPC, DVC and DVC alone and several state governments. Looking
C. K. Thakur (Sterling and Wilson Renewable Energy Ltd): Our solar bid pipeline, excluding battery storage, has grown to 34 GW from 27.7 GW last quarter. About 74% of this is in India and 26% overseas. Battery storage bids are in addition to this. We see bidding opportunities worth about Rs. 45 to 50,000 crore across solar and storage in the second half of this year. Now coming to projects from Reliance Group. Our work with our promoters, the Reliance Group, continues to deepen, as Reliance has publicly announced it is building one of the world's largest integrated renewable energy hubs in Kutch, Gujarat, combining solar power with battery storage at very large scale. We are working closely with Reliance on technical design and execution readiness. International business. Our international business is now on a strong footing. We recently com- completed four projects in South Africa, Spain, and Italy yielding robust margins. Our international order book now stands at Rs. 5,538 crores across Egypt and South Africa. Execution starts in the second half, and international revenue is expected to rise significantly in H2. Now coming to our operation and maintenance business. Our O&M business continues to slow Our O&M business continues to grow strongly. Our portfolio has reached a record 18.9 GW, up from 13.5 GW in March. O&M revenue grew about 55% to Rs. 99 crores in Q2 and 48% to Rs. 183 crores in the first half. This business gives us steady recurring income with low overheads. Outlook for FY '27. We are maintaining our guidance of up to 20 of to 10% revenue growth for FY '27. We are confident for three reasons. First, eight projects in India and overseas will move into execution in the second half. Second, execution will commence on our international order book of over Rs. 5,500 crores, with the West Mania project in Egypt as the key contributor. Third, we have done this before. In Q4 FY '25, we delivered revenue of over 2,500 crores in a single quarter. We expect Q3 to be clearly better than the first half, and Q4 to be our stronger quarters. We expect EPC gross margin of 8% to 10%, depending on the mix of turnkey and balance of system projects, and O&M gross margins of around 20%. We expect our order book to remain above Rs. 10,000 crores at the end of financial year 2027. We believe success in this business is not just about winning orders. It is about completing projects without negative surprises. As the industry consolidates, we believe this discipline will set us apart. With that, I will hand over to Ajeet for the financial performance. Ajeet, over to you, please.
Ajeet Pratap Singh (Sterling and Wilson Renewable Energy Ltd): Thank you, C.K.D. Sir, and good morning, everyone. Revenue from operations for Q2 FY '27 was Rs. 1,527 crore, compared with Rs. 1,749 crore in Q2 FY '26 and Rs. 1,590 crore in Q1 FY '27. Domestic EPC contributed Rs. 1,366 crore, international EPC Rs. 62 crore, and OM Rs. O&M Rs. 99 crore. First-half revenue was Rs. 3,118 crore, compared with Rs. 3,510 crore last year. As C.K.D. Sir explained, the decline was predominantly due to lower international revenue, as older projects were towards fag end of completion and new ones are yet to start. Domestic EPC revenue grew about 13% in the first half and O&M revenue grew about 55% in Q2. Gross profit for the quarter was Rs. 140 crore. Gross margin improved to 9.2% from 8.9% in Q2 FY '26. For the first half, gross margin was about 9.5%. We expect EPC gross margin of 8% to 10%, depending on the project mix. Turnkey projects have lower percentage margins,
Ajeet Pratap Singh (Sterling and Wilson Renewable Energy Ltd): but higher absolute profits. While balance of system projects earn better gross margin, O&M gross margin was about 23% this quarter, and we expect it to settle at around 20%. Operational EBITDA, which is gross profit minus recurring overheads, was Rs 56 crore, a margin of 3.7%. This compares with Rs 62 crore at 3.5% in Q2 FY26. Recurring overheads were Rs 84 crore, about 11% lower than Rs 94 crore a year ago. Reported EBITDA, including other income, was Rs 66 crore compared with Rs 96 crore in Q1. Profit before tax and profit after tax were both Rs 17 crore, compared with a loss of Rs 478 crore in Q2 FY26 and a profit of Rs 53 crore in Q1. First half profit after tax was Rs 70 crore, compared with a loss of Rs 439 crore in H1 FY26. It is worth noting that the loss in the previous year was primarily attributable to a one-time impact arising from the US arbitration outcome and related provisions. On an operating basis, first half operational EBITDA was Rs 134 crore compared with Rs 184 crore last year because of lower international revenue this year. Our recurring overheads have stayed within Rs 79 to 84 crore a quarter. Most of the people we have added work on specific projects, and their costs are included in project budgets. As revenue grows in second half, overheads as a percentage of revenue should fall, and operational EBITDA margin should improve. Now coming to balance sheet and working capital, we continue to operate with negative working capital. Net working capital was negative by Rs 301 crore as at 30th September 2026, compared with negative Rs 260 crore at the end of Q1, and negative Rs 329 crore in March. Receivables including unbilled revenue stood at Rs 3,005 crore. Receivables days increased to 176 from 138 in March, and payable days increased to 164 from 135. Gross borrowings fell by Rs 244 crore in the first half to Rs 920 crore as we repaid term loans as scheduled. With cash and bank balances of Rs 319 crore, net debt was Rs 601 crore, broadly unchanged from Rs 589 crore in March. Shareholders' equity rose to Rs 719 crore from Rs 651 crore. Most of our existing term loans will be repaid over this year and next year. Our banking relationships continue to remain strong. We have secured over Rs 3,000 crore of new credit lines including local lines in South Africa during the current year. And our lenders continue to support as we win orders. On claims and indemnity, we also continue to make steady progress on legacy claims. We have signed a settlement with the Chile customer. Part of the amount is expected to be paid by the customer once their transaction completes, and the balance will be claimed from the promoters in the next cycle. We expect to receive around 156 crore under indemnity in the current year from the promoters. To sum up, the first half was a transition period for our international business, while domestic EPC and O&M continued to grow. We are well-placed for a strong second half with an order book of nearly 12,500 crore, eight projects moving into execution, a growing O&M business. With that, we can open the floor for questions. Thank you.
Moderator: Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question, may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets to ask your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sameer Dalal with Natwarlal & Sons Stockbrokers. Please go ahead.
Sameer Dalal (Natwarlal & Sons Stockbrokers): Yeah. Good morning. So honestly not very impressive results, and I wanted to ask a few questions.
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