Gensol Engineering Limited has expertise in engineering, procurement, and construction (EPC) services for solar projects and also works in leasing electric vehicles (EV). The company was established in 2012 and raised as a turnkey solutions provider for solar plants, consulting services, and EV solutions. It operates in segments of EPC, EV leasing, and EV manufacturing. The company has significant investments of well-known personalities such as MS Dhoni who invested Rs 420 cr, Sanjeev Bajaj & Deepika Padukone with Rs 30 lakh, and Ex-founder of Bharatpe Ashneer Grover with Rs 1.75cr total investment. Gensol was opened at BSE on October 15, 2019, and listed on 30 September 2019 as an SME IPO at an opened price of Rs 85.4 with total issue size of ₹17.93 cr in the market.
The recent downfall of company start after SEBI got complaint in June 2024, related to manipulation of share price and diversion of funds from Gensol for personal use, corporate governance and financial misconduct. After that stock crisis hit dropped 4.6% and 52 week low in BSE. In NSE it fell 5% and hit 52 week low to Rs 94.91 from its 52 week high of Rs 1,125.75.
Reasons for Gensol Meltdown
Stock seems struggling from previous year when company revise it revenue growth for FY 2024 from 1500 to 1000 cr and double in next fiscal year which give adverse sign to investors in market. There are also some main reasons for company fall.
Credit rating agencies
First trigger come from rating agencies by ICRA & CARE rating both downgraded it from -BBB to D which is default category because lenders told to ICRA that company is not paying its debt interest on time but Gensol told we have liquidity of Rs 250cr and also have access of loan from bank which raises concern for corporate governance practices and management integrity.
Pledging of shares
Promoters pledged their 81% of shares to banks for loans as collateral which is very risky. But as shares fell creditors offloaded 7% wrested shares in the open market (by virtue of Financial Service pvt. Ltd., SIPCA India Pvt Ltd., Badjate Stock broking pvt) which creates drastic reduce in prices of company shares. Conditions got more worsen on 18Feb 2025 when promoters sell their stocks to repay its debts which shows financial for company.
Debt Problem
There is a continuous increase in borrowing of the company which was greater than the reserve of the company. If we compare company borrowing it shows a 100 x rise in FY20 to FY24 from Rs13 to Rs1397 cr, Debt to Equity ratio of the company rose from 0.4 in FY20 to 4.3 in FY24 which affects the Interest coverage ratio which fell from 2.7 in FY20 to 1.7 in Fy24. To reduce debt from company books, they decided to sell 2997 cars for Rs315 cr to Refex Company in January 2025 but after Refex company refused to carry forward this deal which was a major setback for the company because Gensol made a deal to transfer all loan associated with Ev vehicles and ownership of EV vehicles to Refex which could them offset some debt from their books.
Gensol and BluSmart case
The financial crisis of Gensol is further worsening with BlueSmart's recent development, an Ev ride service provider company. The blusmart defaulted on Rs 30cr nonconvertible debenture (NCB) and credit rating agencies downgraded BluSmart also. The situation gets more serious because the promoter of Gensol (Anmol sing Jaggi) has a substantial stake in BluSmart company and Gensol has leased 75% of Evs to Blusmart. It benefits only to the promoter of Gensol but loan and interest fall under the name of the company which was a measure concern. The number of vehicle leasing of Gensol to Blusmart skyrocketed from 250 in Q2 FY23 to 8300 in Q3 FY25. This exponential increase creates a question mark on company management.
Change in accounting policy
In past financial disclosures companies made changes in their accounting treatment in which Gensol shifted their leasing model of EV cars from operating to a financial lease structure. This change is managed by the company to manipulate earnings in the profit and loss account. This change was classified by ICAI in 2019, however, Gensol continues to maintain its lease in operating accounting. In the current year, Gensol changed its leasing treatment to financial which raises serious questions on financial auditing. Through this company avoided booking depreciation and finance costs which lowered the debt figure in company accounts.
Leadership Instability
Another sign of deep troubles at Gensol Engineering Ltd. is the frequent change of top leadership in the company. Ankit Jain who was serving as CFO resigned from his position and after that company re-appointed Jabir Mahendi Aga as the new CFO in just six months. These frequent changes in the financial leadership of a company are seen as a major red flag for investors.
Conclusion
Gensol Engineering Ltd. is highlight for massive debt buildup, promoter-linked related party risk, false lease accounting, excessive share pledging, and governance concerns. Currently company is in a serious financial crisis and it eroded investors' trust in the company. To regain investors' trust, the company needs to reduction in debt amount, consistent profit over quarters, and better top management leadership. Without it, financial instability will remain a major concern for the company.
