Gensol Engineering plunges on rating downgrades, promoters stake sale

Shares of Gensol Engineering Ltd (GEL) plunged nearly 28 per cent in the last two days after credit rating agencies CareEdge and ICRA downgraded its loan facilities. The former has downgraded Gensol to ’default’ from ‘BB+’ due to ongoing delays in servicing its term loan obligations.

ICRA has downgraded Gensol’s rating to ICRA D for its total rated amount of ₹2,050 crore, which includes long-term loans (₹925 crore), cash credit (₹718.5 crore), and bank guarantees (₹406.5 crore) from ICRA BBB- (stable)/ICRA A3 rating.

For the second consecutive day, the stock hit the lower circuit (20 per cent on Tuesday and 10 per cent on Wednesday) to close at ₹372.60 on the BSE.

On February 18, its promoter Anmol Singh Jaggi sold 2.15 lakh shares in the open market. Besides, its promoters have also been constantly pledging their holdings with financial institutions.

Gensol operates in the renewable energy sector, providing engineering, procurement and construction (EPC) services for solar projects

ICRA has reported that certain documents shared by GEL with ICRA regarding its debt servicing track record were apparently falsified. This raised concerns about its corporate governance practices, including its liquidity position. Further, delays in debt servicing by more than 15 days to Blusmart’s bondholders in February 2025 points to lapses in liquidity management within the group.

The financial flexibility of the promoters has been significantly impacted, owing to increase in share pledge to 85.5 per cent in February 2025 from 79.8 per cent in September 2024, amid continuous decline in share price of GEL over the last few months. Additionally, there is a delay in equity raise and infusion plans against earlier expectations, it added.

CARE Ratings on Monday revised the ratings assigned to the banking facilities of GEL on account of on-going delays in the servicing of term loan obligations per feedback from its lenders. The rating action is in line with CARE’s policy on default recognition.

GEL’s response

Acknowledging the recent downgrades by CARE and ICRA, the company said: “the downgrade happened due to short-term liquidity mismatch which is improving by way of customer payments. That said, we understand the concerns these downgrades have raised and are committed to addressing them responsibly to all our stakeholders.”

The company has denied any involvement in falsification claims and said they’ll be setting up a committee to comprehensively review the matter. “This underscores company’s commitment to accountability, transparency and sustainable business practices,” it added.

“We would like to reinforce that the company has reported strong growth in key financial parameters across the board,” it further said.

SME to mainboard

The stock of Gensol Engineering was first listed on the BSE-SME on October 15, 2019, after the company raised ₹17.93 crore at ₹83 a share in the IPO. The stock migrated to the BSE main platform and listed on the NSE on July 3, 2023.

The stock has been a darling of market participants since its listing, as it jumped from a mere ₹83 to hit an all-time high of ₹1,217.25 (adjusted for two bonuses 3:1 in 2021 and 2:1 in 2023).