Following a tepid response to the initial public offering of the world’s largest solar EPC company, the listing has also been disappointing.
The shares of Sterling & Wilson Solar Limited listed at Indian bourses on 20 August at a discount of 10.26% to the offer price of Rs 780 (US$10.9). The poor listing was the result of poor investor response and overall weak market sentiment.
As reported earlier, Sterling & Wilson Solar Limited had offered to sell 22.17 million shares. The IPO, however, managed to garner bids for just around 19 million shares. The company had to subsequently reduce the offer size from US$650 million to US$450 million. Only institutional investors oversubscribed the issue while large non-institutional investors subscribed to just 90% of their portion. The greatest disappointment came at the hands of retail investors that subscribed to just 30% of the shares earmarked for them.
The company’s shares listed at the Bombay Stock Exchange (BSE) ended the first day of trading at Rs 725 (US$10.1). The share price briefly slipped to a low of Rs 691 (US$9.67).
Rating agency India Ratings & Research placed high ratings for the company. However, while Sterling & Wilson Solar reported a 20% jump in revenue and a 22% increase in profit before tax in FY2019, the debt also jumped 12 times.
Equity market advisors expressed mixed opinions about what the retails investors should do with these shares. Some advisors continue to express confidence in the company due to the strong credentials of its majority stakeholder and the asset-light nature of its business. One of the advisors cautioned investors against buying the shares before the company reports its quarterly earnings.
Given the weak economic outlook in India and consumption slump leading to poor earnings of companies accompanied by a liquidity crunch, the poor response to the IPO and weak listing of the shares comes as no surprise at all. Retail investors have become apprehensive of renewable energy companies in India, as a result, several of them scrapped IPO plans. Some have managed to raise funds from large foreign investors who are looking to invest in risky but high-rewarding instruments.
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