Reliance Industries agrees to buy up to 40% of Sterling and Wilson Solar for Rs 2,845 cr

Earlier in the day, RIL announced buying out the Norwegian solar panel maker REC Solar Holdings for $771-million from China National Bluestar Group Company

The Shapoorji Pallonji Group on Sunday announced its second asset sale as part of deleveraging its stretched balance-sheet, by selling 40 per cent in Sterling & Wilson Solar, the solar EPC joint venture it runs with the city-based Khurshed Yazdi Daruvala family, to an arm of Reliance Industries for Rs 2,845 crore.

While for the SP Group led by Shapoorji Pallonji Mistry, this is the second asset sale within a month after selling Eureka Forbes for Rs 4,400-crore to the American private equity Advent International, for Reliance this is the second solar acquisition in a day.

Earlier in the day RIL announced buying out the full equity in the Norwegian solar panel manufacturer REC Solar Holdings for USD 771-million from China National Bluestar Group Company. Both the deals are part of RIL chairman Mukesh Ambani’s last AGM announcement of investing Rs 75,000 crore into green energy sector by 2030 when he plans to have 100 gw of solar power and also become a global player in the renewable industry.

Also Read | Reliance buys REC Solar for over Rs 5,791 crore

Reliance is carrying out the deal through its fully owned subsidiary Reliance New Energy Solar (RNESL), which “will acquire 40 per cent (post-preferential allotment to RIL) in Sterling & Wilson Solar (SWSL) through a combination of primary investment, secondary purchases and an open offer,” the companies said in a joint statement, without quantifying the deal value.

It added that RIL will get to nominate two board members. Explaining the deal structure, a Reliance official told PTI that pre-deal SWSL has 16.04 crore equity shares.

As part of the deal, RNESL will first infuse Rs 1,100 crore into SWSL for a 15.46 per cent equity through a preferential issue of shares aggregating to 2.93 crore, thus increasing the equity share of SWSL to 18.97 crore, of which Reliance will buy 40 per cent through the sell down of 1.84 crore equity shares or 9.7 per cent of post-preferential shares by the promoters Shapoorji Pallonji & Company and Daruvalas at a price of Rs 375 per share-- which is at a heavy discount to Friday’s closing price of Rs 434.80.

In the final step to meet the Sebi norms, RNESL will go in for a public offer to acquire up to 4.91 crore equity shares, or 25.9 per cent of paid up equity post preferential issue. "Once the whole structure is completed Reliance will hold 40 per cent of the post preferential share capital or 7.59 crore shares at a price of Rs 375 per share, aggregating the total investment including a full subscription of the open offer at Rs 2,845 crore," the official said.

Reliance New Energy Solar is picking up shares from Shapoorji Pallonji & Company, Khurshed Daruvala (the founding chairman of the company) and Sterling & Wilson Solar, the statements said. Currently in Sterling & Wilson Solar, the Mistrys hold 50.6 per cent, the Daruvalas own 17.9 per cent and the rest is with the public.

Reliance has beaten bulge-bracket private equity funds such as Brookfield, the Canadian pension fund CPPIB and also the largest private sector domestic power producer Adani Power in bagging Sterling & Wilson Solar, which is among the world's largest solar EPC solutions providers. The deal goes a long way for the SP Group to cut debt which at the group level is around Rs 20,000 crore.

For the debt-laden SP Group led by Shapoorji Pallonji Mistry, this is the second asset sale within a month after the Rs 4,400-crore deal for Eureka Forbes it had inked with the American private equity Advent International. The sale will help the over 156-year-old SP Group, which owns 18.34 per cent in the Tata Group, pare its debt pile of over Rs 20,000 core and sharpen the focus on their flagship construction and engineering business under Afcons.

Reliance earlier in the day said it will use REC's technology to manufacture metallic silicon and solar panels at its giga factory at Jamnagar in Gujarat, with initial annual capacity of 4 gw, eventually rising to 10 gw. Ambani had at the Reliance AGM in June had announced spending of Rs 60,000 crore on creating clean energy manufacturing capacity and Rs 15,000 crore on the value chain and technology.

The purchase of the Norwegian solar panel maker is part of the USD 2-billion Ambani had earmarked for acquisitions to create clean energy capabilities. Started as a solar EPC division in 2011, Sterling & Wilson Solar was demerged from April 2017, and went public with a Rs 3,125 crore initial public offer by issuing shares at price of Rs 780 per share in August 2019.

The company has a portfolio of 257 solar power projects with an aggregate capacity of 11.4 gw across geographies and is among the largest solar EPC provider in the world. It is present in 26 countries, with the Middle East and Australia contributing a major part of revenue. As of August 14, 2021, its un-executed order book stood at Rs 8,731 crore, which were executable over the period of next 12 to 15 months.

SWSL has so far executed over 11 gw of solar turnkey projects globally. The company has a 3,000 strong team and presence across 24 countries, providing a comprehensive range of solar energy turnkey solutions including design, procurement, construction, project management and operations and management. RIL chairman Mukesh Ambani said SWSL, with its engineering talent, deep domain knowledge, global presence, and experience of executing some of the most complex projects globally, will become an important part of our solar value chain.

This will enable us to deliver our comprehensive, end-to-end ecosystem leading to cost-efficient green energy for consumers. Shapoor Mistry, chairman of the Shapoorji Pallonji & Co. said this partnership is beneficial to all stakeholders and will greatly contribute to making the country a leading green energy powerhouse. Khurshed Daruvala, chairman of SWSL said SWSL is a global leader in providing turnkey solutions in the energy value chain. Daruvala will continue to be chairman of the board and lead the next phase of growth for SWSL, the statement said.

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