Gensol Struggles with 90-Day Liquidity Crunch, Credit Downgrade, and Fundraising Plans

Gensol Engineering is currently facing serious financial challenges. Founder Anmol Jaggi has admitted that the liquidity crisis may persist for the next 90 days. This comes as the company grapples with a credit rating downgrade, a sharp decline in market value, and difficulties in securing equity funding.

One of the major changes happening at Gensol is its reduced association with BluSmart. Starting April 1, 2024, the company will stop leasing additional vehicles to BluSmart, marking a shift in strategy. This move is aimed at cutting down financial risks, as Gensol’s involvement with BluSmart had been a key factor in its capital allocation.

The company's financial troubles intensified when credit rating agencies ICRA and CARE downgraded Gensol to a default rating. The downgrade was triggered by allegations that Gensol submitted “apparently falsified” debt-servicing documents. In response, the company has set up an independent committee to investigate the matter, ensuring that neither Jaggi nor his brother is part of the probe.

As a result of these financial struggles, Gensol’s stock price has taken a massive hit, losing 65% of its market value in just one month. To address the liquidity crisis, the company has announced a ₹600 crore fundraising plan. This will be done through foreign currency convertible bonds and contributions from promoters. The company is taking urgent steps to restore investor confidence and stabilize operations.

In another major decision, Gensol’s board has approved a 10:1 stock split. Promoters will also exercise warrants at ₹56 per share (face value ₹1 post-split). This suggests an expected share price of ₹560 (pre-split ₹10 per share), which is a 113% premium to the current trading price of ₹262.

One of the key reasons behind Gensol’s liquidity mismatch was its inability to raise equity at the right time. This delayed funding created a cash flow crunch, forcing the company to take immediate corrective measures.

Despite these challenges, Gensol’s solar EPC business remains stable, as it primarily serves public sector clients. To further improve liquidity, the company is selling off 3,000 of its 5,500 vehicles.

To ensure transparency, a Big Four auditing firm has been brought in to review transactions between Gensol and BluSmart. This audit aims to confirm that all dealings were conducted at arm’s length and in compliance with financial regulations.

Looking ahead, Gensol is targeting ₹600 crore in annual revenue. While the company is going through a difficult period, its efforts to secure funding, improve transparency, and restructure operations could help it regain stability in the coming months.