Renewable energy companies have a torrid history in the Indian stock markets with almost all of them hurting investors with massive losses. Some of the companies such as Moser Baer and Indo Solar have gone bankrupt leading to a complete loss for investors in these scrips. Despite the industry maturing, the losses have not stopped with even large companies with a decent track record seeing a drawdown of more than 80%. Suzlon Energy and Inox Wind in the wind turbine space have given losses of almost 90% or more to investors as the wind industry has stagnated and these companies have turned unprofitable with large unsustainable debts and a failed business model.

Sterling and Wilson was supposed to be a blueblood in the renewable energy industry being one of the largest EPC player in the solar project construction industry with a footprint which extended across the world. The company also had a strong portent in the form of the Shapoorji and Pallonji group which is one of the largest construction and real estate conglomerates in India with a history of more than a hundred years. But the stock has continued to fall since its listing and lies almost 80% below its listing price. EPC business is a very risky business especially in India where long delays in terms of getting lands and approvals lead to losses. On top of this, payment by government entities is always challenging leading to many companies recently exiting the EPC space completely.

Also, Why Investing in India’s Renewable Energy Stocks remains a Perilous Exercise

The Sterling stock was also rocked by the failed promise of its promoters to inject money into the company after its IPO which led to a loss of confidence amongst investors who heavily sold the stock. Though the amount has been paid, the fundamentals of the stock continue to be very weak leading the stock price to keep falling and touch its all-time low. With the solar industry in India facing challenges and without any strong differentiation, Sterling and Wilson’s stock price is unlikely to gain much. Though the solar industry continues to have strong growth prospects, the dynamics of the industry are such that the EPC companies are not placed to earn strong profits or margins as they don’t have any competitive barrier.