Gensol share price tanks another 10% as debt reduction plan fails to lift sentiment; stock dips 35% in 3 days

Shares of Gensol Engineering, a leading player in the renewable energy sector specialising in solar power engineering, procurement, and construction (EPC) services, were locked in the 10% lower circuit limit for the second straight session on Thursday, March 6, hitting an all-time low of ₹334.80.

Over the last three trading sessions, the stock has faced intense selling pressure, correcting by 35% after rating agencies CARE and ICRA downgraded the company’s credit ratings.

Addressing the downgrades, the company stated on Wednesday that proceeds from a series of asset divestments would be used to reduce debt. The company’s total current debt stands at ₹1,146 crore against reserves of ₹589 crore, resulting in a debt-equity ratio of 1.95.

Acknowledging the credit rating downgrades by CARE and ICRA, the company attributed them to a short-term liquidity mismatch, which it said was improving through customer payments.

“That said, we understand the concerns these downgrades have raised and are committed to addressing them responsibly for all our stakeholders,” the company said in a statement.

The firm also denied involvement in “falsification claims” and announced the formation of a committee to comprehensively review the matter, emphasizing its commitment to accountability, transparency, and sustainable business practices.

Gensol highlighted its strong financial position, with an order book exceeding ₹7,000 crore, a 42% revenue growth to ₹1,056 crore in the first nine months of the current fiscal year, an 89% rise in EBITDA to ₹246 crore, and a 34% increase in profit to ₹67 crore.

“In the current financial year, we have reduced our debt obligation by ₹230 crore,” the company stated, adding that it has initiated a series of asset divestments to significantly lower its debt.

The measures include the sale of 2,997 electric vehicles worth ₹315 crore and the divestment of a wholly owned Gensol subsidiary for ₹350 crore. As a result of these two transactions, the company expects its debt to be reduced by ₹665 crore, bringing the debt-equity ratio down to 0.8.

Rating Updates

On Wednesday, ICRA Ratings downgraded the bank facilities of Gensol Engineering Limited (GEL) to [ICRA]D following feedback from the company’s lenders regarding ongoing delays in debt servicing.

ICRA noted that Gensol Engineering has defaulted on its debt servicing obligations based on information received from lenders. On Tuesday, CARE Ratings also downgraded the company to default from the previous “BB+.”

Additionally, CARE downgraded Gensol’s long-term bank facilities worth ₹639.7 crore to “CARE D” from “CARE BB+” with a stable outlook. Furthermore, ratings for other long-term and short-term bank facilities were revised from “CARE BB+” with a stable “CARE A4+” outlook to “CARE D.”

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