Sterling and Wilson promoters must provide exit option to minority shareholders: InGovern

Shareholder proxy advisory firm InGovern has petitioned Sebi to force promoters of Sterling and Wilson Solar Ltd to provide an exit offer to minority shareholders alleging failure of promoters to keep the promise made in the IPO document.

Sterling and Wilson Solar Ltd got listed on the BSE and the NSE on August 20, 2019, after promoters belonging to the Shapoorji Pallonji Group made an offer for sale of shares.

"The offer for sale of shares resulted in promoters raising Rs 2,850 crore through the IPO," InGovern Research Services said in a report. "While the objects of the IPO were to enable the promoters to repay loans amounting to Rs 2,563 crore to SWSOLAR within 90 days of listing, the company has received only Rs 1,000 crore on December 31, 2019, i.e., 133 days after listing."
InGovern said the non-utilisation of the IPO proceeds for the stated purpose was tantamount to change of objects of the IPO from what was stated in the prospectus. "This has resulted in aggrieved minority public shareholders."
Shriram Subramanian, founder and MD of InGovern, said, "Overall, a huge loss of reputation for the promoters of the SWSOLAR, the SP group. With substantial -- over Rs 1,700 crore -- erosion of wealth of public minority shareholders, and loss of investor trust for a group that seemed to have a stellar reputation. In order to redeem this reputation, the SP group should provide an exit option for public minority shareholders. This is a demand from minority shareholders and Sebi should force the promoters to provide an exit option for minority public shareholders."
The company however denied any wrongdoing. "Being an offer for sale (OFS), the promoters were under no obligation to mention the utilisation of proceeds. In fact, the promoters made this disclosure in good faith even though it was not required by law. There is thus no legal default as is being sought to be made out."
It went on to deny the allegation of being uncooperative with credit rating agency ICRA saying Sterling and Wilson Pvt Ltd is no longer rated by ICRA for the last few years. "ICRA was unable to withdraw its earlier rating due to its requirement to have an NOC from each and every consortium banker. This matter took time and has now been completely resolved and ICRA has withdrawn its rating of SWPL on January 6, 2020."
The company said the board of directors while approving the repayment schedule levied additional interest of 100 basis points and there is no financial loss to Sterling and Wilson Solar Ltd on account of reschedulement and "it is illogical to link the stock price reduction to this aspect."