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companylogoSterling & Wilson Renewable Energy Ltd

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BSE Code : 542760 | NSE Symbol : SWSOLAR | ISIN : INE00M201021 | Industry : Engineering - Turnkey Services |


Chairman's Speech

Dear Shareholders,

It is with great pleasure that I address all of you today, as we collectively navigate through the challenges posed by the macro-economic landscape. I want to express my sincere appreciation for the unwavering commitment and dedication shown by every member of the SWREL family. Your efforts have been instrumental in helping us overcome the obstacles of the past year, and I am confident that together, we will continue to make remarkable progress on our journey forward.

I take immense pride in stating that SWREL has once again emerged as one of India's leading solar EPC companies. Our success is a testament to the trust placed in us by our stakeholders and the leadership we have demonstrated in winning and executing complex projects, both domestically and globally. We have established an impressive portfolio of EPC projects, totalling 14.7 GWp of capacity, along with a strong O&M portfolio of 6.4 GWp.

Our partnership with Reliance Industries has been a significant advantage for us. As RIL accelerates its commitment to establish a new energy manufacturing ecosystem and transitions towards Green Hydrogen by 2025, we at SWREL stand to benefit from their vision, financial strength, credibility, and robust supply chain. This partnership provides us with strong revenue visibility and positions us favourably in the market.

Over the years we have established a strong brand reputation due to our unwavering commitment to timely execution, risk management strategies, and a steady focus on quality. This is a reputation we wish to continue to build upon from year to year.

Industry challenges

Throughout last year, to add to the tough macroeconomic environment and geopolitical tensions, the industry was buffeted by the rising cost of solar modules, which make up 55-60% of the cost of a solar project. This rise was driven by higher commodity prices primarily on account of silicon, as well as logistics and supply chain issues, including shortage of shipping containers. Rising steel costs and freight costs adversely impacted anticipated returns (ROE) of solar power projects, and even led to some developers postponing project plans.

Talking about India in particular, most of the country's solar panels are imported from China where polysilicon prices and overall panel prices had nearly doubled for some time, creating inflationary pressures on solar projects. This, coupled with the sudden rise in commodity prices, especially the prices of aluminium, copper and steel, created an extremely challenging execution environment for us.

Resilient today. Stronger tomorrow.

Despite these challenges, I am proud to report that we have successfully delivered projects in the most demanding geographies including the US, Australia and Chile. Our in-depth understanding of our customers' needs, coupled with an excellent execution track record and access to cutting-edge technology, reinforces our commitment to delivering all projects successfully.

We managed to achieve some prestigious project wins during the year. Our operations were well-supported by a competent and sizeable 175-strong design & engineering team in India and Dubai. They were responsible for designing innovative and cost-effective solutions and offering a cost-arbitrage in geographies with high resource costs.

Today, we foresee healthy traction in key markets such as India, the US, Australia, and South America, with the total addressable market for solar EPC set to grow by 14-15% per annum.

Performance in FY 2023

Amidst an arduous environment, SWREL's Revenue from the EPC business stood at 1,823.5 crore, compared to 4,974.5 crore in the earlier year. The EPC business contributed 90.5% to the overall revenue, from 95.7% a year earlier. The Unexecuted Order Value stood at 4,913 crore as on 31st March 2023. Revenue of the O&M business was 189.9 crore vs. 222.9 crore. The O&M business constituted 9.5% of total revenue, compared to 4.3% earlier. O&M gross margins were impacted by projects where O&M costs were incurred, however, revenue recognition in these projects has not yet commenced owing to - delays in final handover. The EBIT margin stood at 4.8% in FY 2022-23, as compared to 24.9% in FY 2021-22.

Maintaining our "India" focus

Historically, India has been a profitable market for SWREL. 2022 has been the year of growth in the Indian solar EPC market. As the nation is set to raise its non-fuel-based energy capacity to 500 GW, it plans to fulfil 50% of its energy requirement from renewables by 2030, capturing the solar energy value chain fully and optimally. Creating the right infrastructure to build up capacity quickly will be crucial for the growth of renewables in the near future.

Amidst this boom, SWREL has emerged as one of the top players in the domestic market in terms of order booking. Despite an expanding geographic presence globally, our focus will continue to be on India as the renewable landscape is evolving towards a substantially high market size, of which we intend to capture a significant share. We are indeed in a sweet spot now, with policy encouragement giving us the required optimism. We are targeting an order booking of 3-4 GWp from the Indian market.

Performance in other parts of the world

Australia accounts for the bulk of our revenue at 40%, ahead of North America (22%), India (31%), Latin America (4%), Middle East and North Africa (2%), and the Rest of Africa (1%). Despite all the difficulties and headwinds faced by the EPC markets in the US and Australia, including but not limited to an increase in labour costs and a subsequent increase in site overheads due to loss of productivity which suppressed our margins, we are still the #1 player in Australia, having delivered our projects even during the COVID-19 pandemic and the commodity super cycle.

SWREL is currently working on some of the biggest solar projects in Australia, including the 400 MW Western Downs solar farm being constructed in southern Queensland. We are also bidding and are hopeful of maintaining a large market share, which will help us take our margins back to normalised levels in the near future.

Unparalleled O&M expertise and opportunities

SWREL's proven track record of consistently exceeding performance guarantees ensures high levels of customer satisfaction, particularly in the O&M segment. Our O&M plants achieve an impressive average availability of 99.7%, surpassing the industry norm of 99.5%. We have also established an internationally certified mobile module testing laboratory, enabling efficient on-site module testing. Additionally, our cutting-edge network operations centre provides real-time business insights as an invaluable service to our clients around the globe.

Through digitisation, we are driving towards fully automated operations and revolutionising the industry with an "uberisation" approach to manpower utilisation - right from surveillance to module cleaning and remote monitoring. These advancements enhance plant performance and will pave the way for a more streamlined and efficient O&M process.

With renewable energy playing a noteworthy role in India's energy transition, an ever-appealing opportunity transcends the solar O&M industry. India's solar footprint has matured from 3.7 GW in 2015 to over 60+ GW in FY2022. With this, domestic solar O&M has emerged as a separate, lucrative market with its own landscape and dynamics. As more and more solar plants get stable, an increasing number of O&M contracts are getting re-tendered, presenting a growing opportunity for O&M providers like us. We are consistently growing our O&M portfolio, with a greater focus on third-party O&M in international markets through both organic and inorganic routes.

Becoming a diversified renewables company

As a home-grown Indian company, we are continuously working with different stakeholders to support the country's renewable energy vision. We remain highly optimistic about future investments in the clean energy market, and today we are delighted to increase our EPC offerings in this space to cater to the massive capacity additions being planned across the nation as well as around the world.

As a large part of the global market moves towards micro-grids based on 100% renewable energy, and with an increased focus globally on low-carbon energy consumption, battery storage is becoming the need of the hour, as it is ideally suited to overcome the intermittency issues related to renewable energy, particularly solar and wind. As SWREL's offerings are expanding to also include hybrid energy (Wind + Solar, Wind + BOS) and waste-to-energy solutions, our immediate aim is to improve our market share in the battery storage and green hydrogen spaces. This is a logical extension of our business, thereby making us a diversified renewables company in the rapidly growing ESG market.

Our long-term plan includes adding a capacity of 2 GW every year.

Readying for a better and brighter future

With module prices coming down once again and with the intensifying energy crisis resulting from the Russia-Ukraine conflict, renewable energy has emerged as the most promising solution for ensuring energy security. An unprecedented surge in the sector is anticipated over the next five years. Considering the abundant opportunities at hand and the government's strong support for the renewable energy sector, we hold a profound confidence in the future that awaits us. Our optimism also stems from the fact that India is working towards becoming the 4th largest renewable energy market by 2030, accounting for 9% of all global renewable energy usage.

We are emphasising on enhancing our business in margin-accretive regions, and also maintaining a strategic focus on markets with conducive solar power policies and high solar resources. Together, let us forge ahead towards a brighter and more resilient future.

I want to express my sincere appreciation to the Board members, leadership team, employees, suppliers, and business partners for their constant support in serving our customers.

Thank you once again to all our shareholders for your belief and guidance as we advance towards our mission of shaping a sustainable and secure energy landscape for future generations.

Regards,

Khurshed Daruvala

Chairman

   

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