Sebi probe follows allegations by a few SW Solar shareholders last year that SP Group may have utilized funds raised in SW Solar’s Aug 2019 public share sale for purposes other than those mentioned in its share sale documents
The Securities and Exchange Board of India (Sebi) is investigating suspected financial irregularities at Sterling and Wilson Solar Ltd (SW Solar), the solar power construction business of the Shapoorji Pallonji Group, two people aware of the matter said.
The Sebi probe follows allegations by a few SW Solar shareholders last year that Shapoorji Pallonji and Co. Pvt. Ltd may have utilized funds raised in SW Solar’s August 2019 public share sale for purposes other than those mentioned in its share sale documents. The stated purpose was that promoters would use the money raised from the offer for sale to repay inter-corporate debts. Sebi is now scrutinizing regulatory disclosures made by various SP Group companies to find out how the promoters utilized the funds, said one of the two people cited above, both of whom spoke on condition of anonymity.
SW Solar’s promoters currently owe ₹790 crore to the company, excluding interest. The SP group failed to repay dues of over ₹1,000 crore that were to be paid in June and September. This was part of dues worth ₹2,644 crore that the promoters originally owed SW Solar. The loan was to be repaid within 90 days of Sterling and Wilson Solar’s IPO, which ended mid-November 2019.
In January 2020, proxy advisory firm InGovern noted that the non-fulfilment of obligations by the promoters as per the objects of the IPO has resulted in a loss of over 60% in investment value for IPO investors as the stock price fell drastically from the issue price of ₹780 to ₹310 on 6 January 2020, resulting in a loss of ₹1,700 crore for public shareholders.
In the same month, Old Bridge Capital Management Pvt. Ltd, an investor in SW Solar, wrote to Sebi accusing SP Group of concealing material information in the IPO and “misusing powers" in granting more time to promoters for the repayment of loan out of proceeds of the offer for sale. “In this case, where shareholders have suffered significant erosion in the value of their holdings solely due to the non-utilization of funds as per the objects of offer of the IPO, Sebi must force the promoters to provide an exit offer to shareholders at a price as per Sebi (ICDR) Regulations," InGovern said.
While Sebi did not respond to a query, SP Group said it is unaware of any investigation launched by Sebi, but the group is indeed looking to monetize its stake in SW Solar, among other assets, to meet debt obligations.
“The repayment defaults, and the constant pressure on the stock of SW Solar, may have forced the SP Group to sell at least 30% promoter stake in SW Solar and repay debts worth Rs. 790 crore to the company immediately," said the first person.
“SPCPL, as one of the co-promoters, owns over 50% of the equity stake in the company. SPCPL has sought the relief of a one-time restructuring (OTR) of its obligations under the RBI COVID Resolution framework. As part of this scheme, SPCPL will consider the monetization of its assets, including SW Solar Ltd," said the SP Group.