Gensol Engineering shares crash after Care Ratings downgrades bank loan

Gensol Engineering Ltd (GEL) on Tuesday said Care Ratings has downgraded its bank loan of ₹716 crore to default following delays in “servicing of term loan obligations”, sending the company’s shares reeling.

Following the disclosure, the company’s stock fell 20% to hit the lower circuit, settling at ₹413.95 on the BSE.

“As per feedback from GEL’s lender, there have been delays in debt serving by GEL along with pending overdues and SMA classification of the account,” the Care Ratings dated 3 March said.

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A company spokesperson said: “We would like to clarify that this was a one-time disruption, resulting in a minor delay in debt repayment, which has since been promptly settled.”

SMA is a special mention account, which indicates that the loan is stressed and the borrower is unable to repay on time. According to Reserve Bank of India (RBI) guidelines, an SMA-0 account refers to loans that have been overdue by 1-30 days, an SMA-1 account refers to loans that have been overdue by 31-60 days and an SMA-2 account refers to loans that have been overdue by 61-90 days. After 90 days, the loan turns non-performing and lenders will have to set aside more as buffer to cover potential losses.

“GEL’s liquidity remains poor as reflected by ongoing delay in debt servicing,” Care Ratings said in their report. Gensol issued a statement to the exchanges on 4 March in response to the Care Ratings report.

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‘A healthy order book’

“Gensol continues to maintain strong revenue visibility supported by a healthy order book across our key business segments,” Anmol Singh Jaggi, chairman and managing director, Gensol Engineering, said in the statement.

“We have also undertaken multiple initiatives aimed at strengthening our balance sheet, including focused efforts towards debt reduction and optimizing working capital,” he added.

Jaggi is also the co-founder of BluSmart Mobility. Gensol is engaged in end-to-end engineering, procurement, and construction (EPC) services for solar projects. Mint reported on 24 February that BluSmart Mobility, an electric cab-hailing service, repaid bondholders after triggering a default. Bondholders were repaid after a delay.

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According to an ICRA credit rating report on 22 November, Gensol has borrowed from the Indian Renewable Energy Development Agency Ltd, Power Finance Corp. Ltd, Axis Bank, Tata Motors Finance, STCI Finance, HDFC Bank and ICICI Bank, among others.

Interestingly, in November 2024, ICRA reaffirmed Gensol Engineering’s ratings and said it factors in established track record of GEL in the solar EPC business wherein the company has successfully executed rooftop, ground-mounted and floating solar projects with a total capacity of more than 770MW till date. While Care has downgraded the ratings, ICRA is yet to make any revisions, as per information available on its website.

Last week, Gensol Engineering said it had signed a non-binding agreement to sell its US unit Scorpius Trackers to a US renewable energy company for ₹350 crore. At the time, the company said the sale proceeds would, among other things, help strengthen its balance sheet.

Gensol Engineering reported a revenue of ₹904 crore for FY24 and a net profit of ₹80.48 crore. For the quarter ended December 2024, Gensol reported a revenue of ₹293.63 crore and a net profit of ₹15.1 crore.