Reliance to Acquire Stakes in Sterling & Wilson Solar

Reliance New Energy is already getting aggressive in its latest domain of green energy. A day after the company had picked up 100% in Norwegian REC Solar Holdings for $771 million, it announced an important acquisition in India. Reliance New Energy signed a deal to buy 40% of Sterling & Wilson Solar for a total consideration of Rs.2,850 crore.

The purchase will be made by Reliance New Energy via a combination of preferential offer and an open offer to shareholders. In the first phase, Reliance New Energy will acquire 15% by way of preferential allotment of 2.93 crore equity shares. In addition, it will also buy 25.9% in Sterling & Wilson via open offer to shareholders taking total holding to above 40%. 

Reliance is expected to pay approximately Rs.2,850 crore for the overall stake. Sterling & Wilson Solar (SWSL) is owned by Shapoorji Pallonji group, which had been looking to hive off some of its interests in various businesses to raise the much needed cash to address its immediate liquidity crunch. It also had some recent defaults on its loans.

The Shapoorji Pallonji group has diversified interests across businesses but its predominant construction business had been badly hit by the pandemic. The liquidity situation at the Pallonji group had worsened after their fallout with the Tata Group over the removal of Cyrus Mistry from the chairmanship of Tata Sons in October 2016.

SWSL is a global end-to-end pure play on the solar energy business. SWSL is into engineering, procurement and construction of solar plants. It has a strong franchise in project design and execution; managing all aspects of the project design ranging from concept to commissioning. For Reliance group, with its aggressive green energy plans, this would be one more inorganic fit into its overall business model.

Market expert are also hinting that this could be the beginning of a closer association between two large business groups viz. the Reliance group and the Shapoorji Pallonji group. For a long time, the Tata group and the Pallonji group had very closer relations and were virtually synonymous with each other. After the fallout, the Pallonji group may be looking to spread its business bets and this deal surely fits into that logic.

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