Smallcap tanks 20% on heavy volumes today; plunges 63% from 52-week high

Gensol Engineering share price dragged after CARE Ratings downgraded the company's ratings on long-term and short-term loan facilities to 'default' category

Gensol Engineering share price was locked in the 20-per cent lower circuit, hitting a 52-week low of Rs 413.95, on the BSE in Tuesday's intraday trade amid heavy volumes. The stock price of the smallcap company has tanked 63 per cent from its 52-week high level of Rs 1,125.75, which it touched on June 24, 2024.

 

The average trading volume on the counter jumped over five-fold, with nearly 1 million equity shares changing hands on the NSE and BSE, till the time of writing this report. Moreover, there were pending sell orders for 200,000 equity shares on these exchanges, data shows.

 

 

The drag in Gensol Engineering shares came after rating agency, CARE Ratings, downgraded the company’s ratings on long-term and short-term loan facilities due to the on-going delays in the servicing of term-loan obligations.

 

According to the agency, it has downgraded Gensol Engineering’s Long Term Bank Facilities, worth Rs 639.7 crore, to ‘CARE D’ from ‘CARE BB+’. Similarly, it has downgraded the ratings on Long Term / Short Term Bank Facilities, worth Rs 76.3 crore, to ‘CARE D’ from ‘CARE BB+’/ ‘CARE A4+’.

 

The rating action, Care Ratings said, is in-line with CARE Rating’s policy on default recognition.

 

“As per the feedback from GEL's lender, there have been delays in debt servicing by Gensol Engineering, along with pending over dues and SMA classification of the account. The liquidity situation at the company remains poor,” it said in a statement.

 

Gensol is a leading player in the renewable energy sector, specialising in solar power engineering, procurement, and construction (EPC) services, along with electric mobility solutions. Venturing beyond solar, Gensol has established a state-of-the-art electric vehicle (EV) manufacturing facility in Chakan, Pune (India), with a production capacity of 30,000 vehicles per annum.

 

Gensol not only manufactures but also provides comprehensive EV leasing solutions, catering to a diverse clientele that includes PSUs, educational institutions, government entities, multinational corporations, ride-hailing services, employee transport companies, rental services, logistics, and last-mile delivery enterprises.

 

In the October to December quarter (Q3FY25), Gensol Engineering had reported a 6 per cent year-on-year (Y-o-Y) rise in profit after tax at Rs 18 crore as compared to Rs 17 crore in Q3FY24. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin contracted to 18.3 per cent from 20.1 per cent. However, total revenue grew 30 per cent Y-o-Y to Rs 345 crore as against Rs 266 crore in the year-ago quarter.

 

As on December 31, 2024, Gensol Engineering has 38 million total outstanding equity shares. The promoters held 62.65 per cent stake in the company. The remaining 37.35 per cent holding is with the public shareholders, of which, 30.54 per cent stake is with the retail individual shareholders, data shows.

 

That said, the management is optimistic about the outlook for India's solar energy sector, driven by a combination of supportive government policies, technological advancements, and increasing cost-competitiveness.

 

"As the country progresses towards its target of 500 GW of non-fossil fuel-based electricity generation capacity by 2030, solar energy is set to play a pivotal role, contributing significantly to India’s energy transition and climate change mitigation efforts," Gensol Engineering had said in its FY24 annual report.

 

Meanwhile, the electric vehicle (EV) industry is heavily reliant on the supply of raw materials such as lithium, cobalt and nickel. Disruptions in the global supply chain, as well as geopolitical tensions, can impact the availability and cost of these materials, affecting production and pricing.

 

Among key risks, the highly competitive renewable energy sector in India can affect the company's ability to bid and win new projects to expand its market share. With a limited number of local and global suppliers available, the company faces the risk of delayed supply or unavailability of key raw materials, which could impact the timely completion of projects or lead to increased costs ahead.

 

Fluctuations in the prices of commodities used in solar projects, such as metals and other raw materials, can affect the company's profitability. A sharp increase in the price of polysilicon, a key input for solar cell and module manufacturing, can lead to higher solar module prices, affecting project costs and profitability.

 

To mitigate risk factors, the company has taken measures including Gensol has established long-term relationships with reliable suppliers and conducts due diligence before onboarding new vendors. Gensol’s risk management team adopts various strategies to minimise the impact of commodity price fluctuations. The company maintains a diversified supplier base and strategic inventories to mitigate the risk of price volatility, Gensol Engineering had said.