This is the first IPO from Shapoorji Pallonji. Why now? Can you tell us why are you hitting the markets and a little bit more about the company?
We have been partners with Shapoorji Pallonji family from my grandfather’s time and we have a number of businesses beside the solar business within the Sterling & Wilson Group. Over the last few years, the solar business has grown phenomenally well. We have become the number one solar EPC company in the world and the solar business is one of the unique EPC businesses where we have grown the entire business without having much capital employed. The cash flow from this business actually was helping grow all the other businesses that we have within the group.
I think a time came where I had a discussion with Shapoorji Pallonji saying that it is important that this business becomes a standalone business, so that we can take advantage of the growth opportunity that we have over the next 20-30 years in solar and that was one of the important reasons to do a demerger and make sure that this becomes a standalone strong balance sheet for this purpose.
Can you tell us a little bit more about the purpose of this IPO. Is it a fresh issue or is it an offer for sale and what will the proceeds be used for?
It is a pure offer for sale. Like I said the solar business actually does not need large capital to grow. That us why we are doing a secondary offer for sale. The money will come to Shapoorji Pallonji and myself. We will be infusing a large portion of that money back into the non-solar business. The non-solar business actually would be paying back what it is used for the solar business which actually pays back the bank. Post the IPO, the plan would be to get the solar business to be a debt-free company.
Talk to us about the demerger process as well from Sterling and Wilson.
The solar business is getting listed. What is not getting listed where solar got demerged out from is that we are India’s largest electromechanical company or MEP company. We are large in sub-stations. We are India’s largest data centre EPC company. We have a transmission distribution business so there are lot of other businesses which are not going to get listed.
What is the order book is looking like?
We have 16% odd of the Indian market share. India continues to be a very important market for us. The Indian market also will grow but globally we have been expanding. From three countries, we are in 26 countries now and truly at a global scale, we do not have any peer competing with us at a global level. That is a huge opportunity for us where we are seeing that business is growing substantially and over the period of time the share of solar India as a percentage of our overall revenues will keep going down.
What are the risks in terms of project financing that you foresee going forward?
We have at least five or six EPC businesses within the group. The solar international business is one of those rare businesses where we do nearly all jobs so that we are financially closed before we start. Hence the counter party, my client is a very credible IPP. Then there are global funding institutions who are again mostly multilaterals. It is a pretty unique EPC business which is ring fenced from a cash flow perspective.
Could you tell us about the opportunities that the investors are getting into, going forward?
I would have to touch upon the solar opportunity globally. Without subsidies, in 2016, globally solar became more competitive then the coal based or thermal power plants. Since then, the solar prices have come down substantially. Without subsidy, solar has become a source of energy that the world is moving towards. In 2012, less than 10% of the annual capacity added in the world came from solar. Last year, it was over 25%. So, there are huge growth opportunities. You have got a situation where the market is projected to grow fast and by 2022, somewhere between 2% and 3% of the electricity will be generated by solar globally. So, you can imagine the opportunity over the next 20-30 years because this number will have to go up and become a substantial number of the world energy market.
We are fortunately in the right place at the right time and being the leading company globally, we should be able to capture a substantial part of this opportunity.
