Gensol Engineering shares crash after Care Ratings downgrades bank loan
Introduction
Gensol Engineering Ltd (GEL) has been hit hard after Care Ratings downgraded its bank loan of ₹716 crore to default following delays in "servicing of term loan obligations". This news sent the company’s shares plummeting, with the stock falling 20% to hit the lower circuit, settling at ₹413.95 on the BSE.
Ratings Downgrade: A Wake-up Call for Gensol Engineering
Care Ratings, a leading credit rating agency in India, has downgraded Gensol Engineering’s bank loan to default, citing delays in debt servicing and pending overdrafts. This move has sent shockwaves through the market, with investors fleeing the stock.
What’s Behind the Downgrade?
The rating agency attributed the downgrade to Gensol’s poor liquidity, reflecting ongoing delays in debt servicing. As per the agency, Gensol’s lender had reported delays in debt servicing, along with pending overdrafts and SMA (Special Mention Account) classification of the account. In other words, Gensol was unable to pay its debts on time, leading to the downgrade.
Impact on Share Price
The news sent Gensol’s share price tumbling, with the stock falling 20% to hit the lower circuit, settling at ₹413.95 on the BSE. This significant decline in share price led to a loss of market value, leaving investors concerned about the company’s financial health.
A Strong Order Book, But Liquidity Concerns
Despite the rating downgrade, Gensol Engineering maintains a strong order book across its key business segments. Anmol Singh Jaggi, Chairman and Managing Director, assured investors, "We continue to maintain strong revenue visibility supported by a healthy order book." However, the company’s liquidity concerns remain a major concern.
Debt Reduction Initiatives
Gensol is engaged in various initiatives to reduce debt and optimize working capital. Jaggi highlighted, "We have undertaken multiple initiatives aimed at strengthening our balance sheet, including focused efforts towards debt reduction and optimizing working capital." These efforts will be crucial in addressing liquidity concerns and regaining investor confidence.
ICRA’s Verdict: A Contrast to Care Ratings’ View
ICRA, another respected credit rating agency, has a different view on Gensol Engineering. In November 2024, ICRA reaffirmed Gensol’s ratings, citing the company’s established track record in the solar EPC business. ICRA’s report noted that Gensol has successfully executed rooftop, ground-mounted, and floating solar projects with a combined capacity of over 770MW. This divergence in opinion suggests that Gensol still has a chance to turn things around.
Other Developments
Gensol Engineering has also been in the news for its ongoing efforts to sell its US unit, Scorpius Trackers, to a US renewable energy company for ₹350 crore. The sale proceeds will help strengthen the company’s balance sheet.
Conclusion
Gensol Engineering’s shares have taken a hit after Care Ratings downgraded its bank loan to default. While the company’s order book remains strong, liquidity concerns remain a major concern. With debt reduction initiatives underway, Gensol still has a chance to recover and regain investor confidence. Ultimately, the company’s ability to address its debt issues will be crucial in determining its future performance.
Will Gensol Engineering be able to recover from this ratings downgrade? Share your thoughts in the comments below!
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