Gensol Engineering is currently navigating a series of financial hurdles, including a recent adjustment to its price band and a downgrade in credit ratings. In a strategic move to enhance liquidity, the company’s promoters have decided to sell approximately 2.37% of their total equity, representing 9 lakh shares. This initiative aims to bolster the company’s financial stability and is part of a broader effort to address recent challenges, as detailed in an exchange filing made public on Friday.
Promoters’ Commitment to Financial Reinforcement
The sale of shares will serve as a crucial financial injection into Gensol Engineering. The promoters, who maintain a commanding 59.70% stake, plan to reinvest the proceeds back into the business. They have also pledged to contribute an equivalent amount—or potentially more—during an upcoming warrant subscription round set for June 18, 2024. Such actions underscore their commitment to the company’s growth and expansion plans.
Addressing Credit Rating Challenges
Recently, Gensol Engineering received a downgrade from CARE Ratings, causing its long-term bank facilities rating to drop from CARE BB+ to CARE D. Concerns were raised regarding the company’s liquidity and increasing debt levels. In response, Gensol has initiated a comprehensive strategy to alleviate its debt burden. This includes the sale of 2,997 electric vehicles and the divestiture of a wholly-owned subsidiary, projected to reduce its debt by Rs 665 crore and improve its debt-equity ratio from 1.95 to 0.8.
- Current total debt: Rs 1,146 crore
- Current reserves: Rs 589 crore
- Debt-equity ratio improvement: From 1.95 to 0.8
Gensol acknowledges these financial challenges but emphasizes that they stem from a temporary liquidity mismatch rather than any underlying business flaws.
Recent Stock Performance
The stock performance of Gensol Engineering has been under significant pressure, with shares experiencing downward momentum. Over the past week, the stock has hit lower circuit limits three times, resulting in a 37.5% drop. In the last year, the stock has plummeted by 68.21%. As of Friday, shares closed at Rs 334.80, reflecting a 2.33% decline compared to a minimal rise of 0.03% in the NSE Nifty 50 index.
Conclusion
Gensol Engineering’s proactive measures, including a strategic share sale and debt reduction initiatives, highlight the company’s commitment to overcoming financial challenges. As they work to stabilize their position, stakeholders will be keenly observing how these developments impact the company’s long-term viability and growth trajectory.
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